If you're in the process of selling your business—or even just thinking about it—one question tends to come up pretty quickly: 

“Why do I have to leave working capital in the business? Isn’t that my money?” 

It's a fair question. After all, you’ve built the business, you’ve managed the cash flow, and you’ve served the clients. It feels natural to think that what’s in the bank or tied up in inventory should come with you when you sell. But in most business sales, that’s not how it works—and for good reason. 

First: What Is Working Capital, Really? 

Working capital is what keeps your business running day to day. It’s the cash in the register, the invoices your customers still need to pay you (accounts receivable), and the inventory you’ve already purchased or produced—minus the short-term bills you still owe (accounts payable). 

In short, it’s the money the business uses to stay in motion. 

A Helpful Analogy 

Imagine you're selling a car. The buyer expects to drive it off the lot, not push it home. That means it needs tires, keys, and at least enough gas to get going. 

That’s exactly how buyers view working capital. They’re not asking for something extra—they just want the business to function on day one without having to immediately invest more cash into it. 

Why Buyers Expect Working Capital in the Deal 

From the buyer’s perspective, they’re purchasing a fully operating business, not a shell that needs to be refueled right after they close. If you were to pull out all the cash, clear out inventory, and collect every last dollar of accounts receivable before the deal closes, the buyer would be stuck covering all the immediate expenses themselves. That could be payroll, supplier payments, or keeping shelves stocked. 

Naturally, they'd offer less for the business to make up for that shortfall—so either way, it affects the price. 

That’s why most deals include something called a target working capital. This is a number both the buyer and seller agree on during negotiations. It represents the "normal" amount the business needs to operate based on historical performance. 

But Aren’t You Just Giving That Money Away? 

Not at all. 

When you sell your business, the purchase price already includes a normal level of working capital. It’s built into what the buyer is offering. You’re not losing it—it’s just accounted for differently than, say, equipment or real estate. 

Even better, if the actual working capital at closing is higher than the target amount, you typically get that excess back. It gets calculated and settled right before closing, and you’re credited the difference. 

Here’s the Bottom Line 

Leaving working capital in the business is not a loss. It’s a standard part of most small business sales, and it helps ensure: 

• A smoother transition 

• A functioning business for the buyer on day one 

• A deal that actually closes (and closes well) 

Understanding how it works—and how it’s accounted for—can help you avoid surprises and get the full value for the business you’ve worked so hard to build. 

If you’re preparing to sell and want help understanding what your working capital target might look like, feel free to Contact Us. The more informed you are, the more confident you’ll be at the negotiation table.