Working Capital for Business with Low-Volume, High-Dollar Sales

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by a searcher from Washington State University
in Seattle, WA, USA

2yrs ago

Working Capital for Business with Low-Volume, High-Dollar Sales

I’m looking at a business that manufactures very niche heavy industrial equipment. Problem is they only do about one sale a year and that income sustains them for the whole year

How would you go about formulating a working capital peg for LOI purposes? Any tips or expertise from similar experiences?

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reply by an intermediary 2yrs ago
from Naval Postgraduate School in Bellevue, WA, USA

II would model the monthly cash flow based upon the last sale and a conservative projection of the next sale. Once you have tweaked the model to reflect no need for an additional infusion of cash, you can then establish the working capital balance needed by month. Depending on what month you close, the (variable) working capital requirement will be obvious.