You bought the business. What’s left to run it?
The closing wire is one cash requirement. Your first payroll is another.
Picture buying a regional maintenance company. The purchase price is agreed. The lender is ready. Your equity is committed. Everybody can see a path to closing.
Then you ask a different question: how much money will actually be available in the company’s bank account on Monday morning?
That question deserves an answer before Friday’s wire.
Joe Camberato makes a useful distinction in ACG Insights: financing a transaction does not necessarily fund the work needed afterward. ACG Insights
For a buyer, the practical question is not simply whether the deal is funded. It is what cash, receivables, bills, and operating obligations you will inherit, and when each turns into money entering or leaving the bank.
Follow the cash through the handoff
Start with the first-month cash forecast:
$150,000 of unrestricted cash available at closing.
$100,000 of customer payments expected before the next major bills fall due.
$300,000 of payroll, supplier payments, and other cash outflows during that period.
That is a $50,000 shortfall. The acquisition might still be a sensible investment. But “we have the money to buy it” has not answered how this period gets funded.
An annual profit forecast will not fix the timing problem. Unpaid invoices will not fix it either. The owner must identify the missing $50,000 before it becomes an urgent request to investors or a delayed payment to employees or suppliers.
Change the assumptions and the answer changes. That is why the forecast matters. It tests the acquisition; it does not predict that every acquisition has a cash gap.
The legal lens: negotiate the handoff, not just the headline price
The illustration's “sold separately” tag is a joke, not a rule. Working capital is not automatically excluded from a purchase. The agreement defines the bargain. One publicly filed agreement, for example, includes receivables and salable inventory, subtracts assumed current liabilities, and excludes cash from its working-capital calculation. That is one negotiated definition, not a universal formula. Filed agreement, §3.4
Use this sequence before committing:
1. Start in the LOI, not at the closing table. Before agreeing to a headline price, discuss whether it assumes a specified level of working capital and whether inventory is included in that price or priced separately. Put the intended adjustment approach in the letter of intent. If diligence is needed to set the target, identify the proposed methodology, information needed, and when the parties expect to settle it; mark unresolved points explicitly rather than presenting them as agreed. Have counsel distinguish proposed commercial terms from binding obligations. The LOI is an alignment step, not a substitute for the definitive agreement or a guarantee against disagreement.
Then have counsel and your accounting adviser identify the included accounts, exclusions, and target (sometimes called the working-capital “peg”). Test the proposed target against the business's operating cycle, seasonality, and unusual balances. Attach a worked calculation to the definitive agreement so both sides can see the intended result. The question to resolve early is simple: “When we say this price, what exactly do we expect to stay in the business?”
2. Separate inventory from the broader calculation. An inventory-only true-up reconciles the agreed quantity or value of stock. It does not, by itself, reconcile receivables, payables, or other agreed working-capital accounts. Inventory can also be a component of the broader adjustment. The filed example expressly excludes obsolete inventory. Negotiate counting procedures, valuation, reserves, and treatment of damaged, slow-moving, or consigned goods; coordinate any separate inventory adjustment to avoid counting the same change twice. Filed agreement, §§3.3–3.4
Now change the facts. Inventory meets its agreed $400,000 level, but assumed trade payables exceed the target assumption by $150,000. If those payables enter the agreed calculation and everything else stays constant, net working capital is $150,000 below target. Inventory is on target. The business is not. An inventory-only check misses the difference.
3. Specify how the adjustment gets calculated and paid. Address the closing estimate, post-closing statement, accounting rules, supporting records, objection deadlines, disputed items, and payment timing. Decide which rules control if specific policies, historical practice, and general accounting standards conflict. Public agreements illustrate both adjustment procedures and carefully limited accountant dispute mandates; the details are negotiated, not automatic. Filed agreement, §2.5
If the agreement calls for a dollar-for-dollar adjustment against a $1 million target and final working capital is $850,000, the total target-based reduction is $150,000. If $100,000 was already reflected at closing, only $50,000 remains to reconcile under this simplified example. Do not subtract the full shortfall twice.
4. Protect the period before closing and the ability to collect afterward. Discuss controls on unusual inventory reductions, changes in collection practices, and delayed supplier payments, with appropriate consent exceptions. A filed acquisition agreement illustrates ordinary-course commitments covering inventory management and trade payables. Separately, consider whether an adjustment escrow or other negotiated payment protection is appropriate; do not assume a right to payment is immediate cash. Filed agreement, §6.1
These provisions align what you pay with what you receive. They do not replace the opening cash forecast.
Inventory cannot pay Friday's payroll until it becomes cash. A later seller payment may arrive after the bill is due.
If the seller keeps it, price the replacement
Pioneer Capital Advisory frames the SBA-acquisition issue usefully: buyers can focus intensely on the purchase-price multiple while failing to decide who keeps the receivables, inventory, and other operating assets the business has historically carried. Its broader point is worth bringing into the LOI conversation: if the seller keeps an operating asset that your model assumes will be available after closing, the buyer may need to fund its replacement in addition to the headline price. Pioneer Capital Advisory
Do not call that replacement funding “free working capital.” Put it into sources and uses. Model the resulting debt service or cash contribution. Confirm when the money will be available. For an SBA-financed acquisition, bring the lender into the discussion while the LOI is still being negotiated. The purchase agreement cannot decide whether a proposed use is eligible, how much the lender will support, or what equity and documentation the lender will require.
THE BYS DECISION FRAME
A buyer should test three separate lines:
Working-capital economics: What level of defined net working capital is included in the negotiated price?
Purchase-price adjustment: How will the price change if the delivered amount differs from the agreed target?
Operating liquidity: After giving effect to the closing and any financing, what cash or available credit will pay payroll, rent, suppliers, and replenishment until collections arrive?
A strong deal model reconciles all three. None should be allowed to masquerade as another.
Test the backup plan, too
“We have a credit line” is the beginning of the next question. How much can you actually draw, when can you draw it, and what conditions must be satisfied?
Have the financing team confirm availability against the signed documents. The face amount is not necessarily money in the bank. If investors are the backup, determine whether the additional contribution is a commitment or merely a conversation.
Then rerun the cash forecast with customer payments arriving later than expected. Look for the lowest projected bank balance, not just the ending balance. A month can finish positive and still contain a week you cannot fund.
Three things to do before signing
First, prepare a weekly cash forecast for the first 13 weeks under new ownership. Second, reconcile its opening position with the proposed purchase agreement. Third, assign a named funding source to any projected shortfall and verify that it will be available when needed.
The aim is not to add another document to the closing folder. It is to know what happens when the celebration ends and the next bill arrives.
Before you sign: Ask your deal team to walk you from the closing statement to the first payroll. Every dollar on that route should have an explanation.
Planning an acquisition? Tolbert Legal can help review how the proposed transaction documents address the operating handoff.
Schedule a conversation: https://calendly.com/tolbert-legal
Informational and educational only; not legal, tax, accounting, or investment advice.
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