Working Capital for Business with Low-Volume, High-Dollar Sales

by a searcher from Washington State University

11 months ago

I’m looking at a business that manufactures very niche heavy industrial equipment. Problem is they only do about one sale a year and that income sustains them for the whole year

How would you go about formulating a working capital peg for LOI purposes? Any tips or expertise from similar experiences?

0 likes
66 views
1 comment

intermediary from Naval Postgraduate School

II would model the monthly cash flow based upon the last sale and a conservative projection of the next sale. Once you have tweaked the model to reflect no need for an additional infusion of cash, you can then establish the working capital balance needed by month. Depending on what month you close, the (variable) working capital requirement will be obvious.

11 months ago | like reply | 2 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Investor seeking Self-Funded Search Deals

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Downsides of "buying a job" below 750k+ EBITDA?

6-7x for a Self-funded Search Deal?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.