How I Saved $450,000 and Prevented a Cash Crunch in a Small Business Deal

1/ Here’s a quick story about a deal that almost went off the rails—and how I fixed it.

2/ Imagine buying a business. Everything looks great, and you’re ready to take over. But after digging into the details, a big problem pops up: the cash set aside to keep the business running (called Net Working Capital) is way too low.

3/ In this case, the plan was to set aside $500,000 to cover expenses after the ownership transition. Sounds fine, right?


4/ But when I looked closer, it became clear this wasn’t enough to pay bills, keep projects going, or even make payroll. If this wasn’t fixed, the new owner would be stuck in a serious "cash crunch" shortly after taking over.

5/ Here’s how I solved it:

Step 1: Review the Timeline

I started by pinpointing the ownership transfer date (e.g., 2/1/25). This was the critical moment when the new owner would need enough cash to take over and ensure the business would run smoothly.


6/ Step 2: Identify Ongoing Commitments I gathered details about active projects and upcoming obligations, like bills and contracts, to see what the business needed to pay for in the near future.

7/Step 3: Estimate Sales and Costs I worked with the seller to figure out how much money the business was expected to make and spend during this "Ownership" transition period.

8/ Step 4: Analyze Cash Flow I compared the expected money coming in versus the money going out and That’s when it became clear: $500,000 wasn’t enough.

9/Step 5: Adjust the Plan I asked to increase the target to $950,000. This amount would cover all expected expenses, including fixed costs like rent and payroll, without leaving the new owner short.

10/The Result: By understanding the numbers, I saved $450,000 and avoided a cash crisis. Most importantly, I ensured the business would continue to run smoothly, protecting employees and operations.

This work isn’t just about numbers—it’s about ensuring businesses and people succeed during critical transitions.

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