Underestimating Working Capital Can Ruin a Great Business – Here's How to Get Ahead of It

This Week in ETA:

• Searchers: I am a huge proponent of over-estimating working capital needs. The crucial period during the first few months of ownership before cash starts flowing can make or break even a great business (and operator). Matthias at Pioneer Capital Advisory gives solid advice on how to make sure you budget enough working capital when acquiring a business using an SBA loan. Three key takeaways: 1) Plan for at least 3-6 months of operating expenses, 2) Include a working capital cushion in your SBA loan, and 3) Inject additional equity to act as operating cash (we can help you with this)!

• Investors: This deep dive on accounting for inventory when buying a business brings up some key “watch-outs.” Goran at AWG Capital Advisory highlights how inventory isn’t static; it’s an operating asset that can reveal operational weaknesses, distort EBITDA, and drain post-close liquidity. Disciplined inventory diligence is key to avoiding pricing surprises and knowing what’s really on the shelves of your business.

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Plus:

• New to search? The Searchfunder community pooled some recommended resources for getting started here.

• As the government shutdown continues, a note from Heather at VISO Capital on the impact to SBA loan status.

• Chicagoans: 1/ We are co-hosting an SMB Investor/ETA Meetup with Rejigg in River North on October 22. Let’s meet! If you’re able to join us, please RSVP at this link.  2/ I’ll be speaking at the M&A Launchpad conference on October 25. Using coupon code “GRANT,” you can get $150 off when you register.

Question:

Hit reply and tell us - What ETA events are you attending over the next few months?