What If Your “Financial Discipline” Is Killing Your Exit?

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Hey, it’s David

Welcome back to M&A from the Plane , quick stories and insights drawn from the many miles I log in the air talking to business owners, founders, and dealmakers.

Most owners know their EBITDA.
Far fewer understand how working capital affects the actual value they’ve built.

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…Do I have to bring my own food on this flight?

I was on a flight recently, chatting with a business owner prepping for a sale.
He seemed bright. His business seemed attractive and he was very well-spoken when it came to his financials.

But when I told him the buyer expected working capital to stay in the deal, he bristled:

“I should be getting paid for my earnings and keeping my working capital.”

So I asked:

“When you boarded this flight, do you expect to pay extra for the jet fuel?”

He laughed.

“No, that’s included.”

Exactly.

Working Capital Isn’t Extra , It’s Operational Fuel

Buyers expect to inherit enough working capital to keep the business running.
We recently reviewed a deal where the seller assumed they’d walk with EBITDA and the full balance sheet. That’s a fast track to a broken deal or a bitter negotiation.

Here’s what buyers actually expect:

• Inventory aligned to sales, not stockpiled

• Payables and receivables balanced

• Enough cash to operate normally

• No post-close liabilities dumped at the finish line

Working capital isn’t a “give.”
It’s what makes the business operate.

Here’s the Disconnect  

Another owner we worked with prided himself on being a good steward.

He paid vendors early, carried deep inventory, and kept receivables high… but his working capital demands were massive.

From his view, that was discipline.

From a buyer’s lens, that was a liquidity drain.

From a real-world deal perspective, it almost completely wiped out his valuation.

The lesson? What looks “responsible” on paper may be value-destructive at exit.

Final Thought

If EBITDA is the ticket, working capital is the jet fuel.
And buyers assume it’s included.

Miss that, and you’re negotiating blind.

If you’re unsure how your balance sheet will be viewed in a deal, we can walk you through it before you find yourself with no runway left.

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David