Thoughts on searching for businesses based on Cash Conversion Cycle?

by an member from York University

4 years ago

I am writing a blog post on cash conversion cycles (largely for selfish reasons - as I want to understand the concept a bit better and how it might impact how I'd look for companies). 

https://docs.google.com/document/d/1mKfuUhjP-3HQWCvkEoNe9ERejnDl0A5c-M_34vNuOSw/edit?usp=sharing

I'd love to get feedback from people in the community if they're up for it. Feel free to comment on the document or post your general thoughts in the thread.

6 likes
113 views
5 comments

searcher from Harvard University - Harvard Business School

Thanks Karen - hadn't seen the follow-up question. The CCC impacted my view of the opportunities in the business: namely free up cash by improving CCC on all dimensions.

4 years ago | like reply | 0 likes

searcher from Harvard University - Harvard Business School

I purchased a seasonal consumer durables manufacturer. Our industry has horrible CCC characteristics. I'm buying plastic sheeting now that will be a paid invoice next June (!). That said, due diligence found opportunities to improve all three components: accelerate payment by automating collection reminders, grow AP days through use of a purchase card, and increase inventory turns by using projections to guide inventory purchase decisions. Understanding a company's conversion cycle relative to its peers, and identifying opportunities for improvement, is a big opportunity.

4 years ago | like reply | 3 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

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

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

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.