Have an LOI I’m working through with sellers. I created a working capital peg and the sellers want to fulfill this with work-in-progress (orders paid in full once completed).
is this typical? How have you worked through this in the LOI acceptance process?
Is work-in-progress typically part of asking price?
by a searcher from The University of Texas at Austin - Red McCombs School of Business
More on Searchfunder
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.
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.
Mike, thank you! I will reach out via DM to work through identifying WC peg. Thanks for clarification that inventory consists of raw, WIP, and FG. I wasn't entirely clear whether WIP should be included or not at first. But, now, I believe it should otherwise how would I operate the business without a huge gap in revenues. As an example, if no WIP was included by the sellers, and I assumed ownership, it would take it roughly###-###-#### days for me to intake orders, manufacture, install, and receive payment.
Sam, the work in progress are customer orders that will likely be finalized, manufactured, installed, and paid. The business does not collect any payment prior to installation; historically delinquent payments are not a problem. Further, they do not begin manufacturing until there is an installation date specified by the customer. This is a natural mechanism in their manufacturing flow that prevents incurring costs if a customer is not committed to product delivery (not great protection, but it works).