Our business generates high revenue, but we have a massive cash conversion cycle because our inventory and accounts receivable are managed loosely. How does optimizing our working capital cycle on our exit runway impact the multiple a buyer will pay, and how do we use EOS tools to fix this?

Question

Tyler Smith · Accepted Answer

Buyers do not just look at your top line revenue and EBITDA. They closely evaluate your net working capital requirements. If your business requires massive cash reserves to fund inventory or wait out long receivables cycles, a buyer will adjust the final purchase price downward to cover that cash drain.

Optimizing your cash conversion cycle is one of the fastest ways to increase the cash you take home at closing.

To address this on your exit runway, use your weekly EOS Scorecard to track key capital efficiency metrics, such as days sales outstanding, inventory turnover, and days payable outstanding. Assign clear ownership of these metrics to specific seats on your Accountability Chart, typically under your Finance seat.

Set quarterly Rocks to systematically improve these numbers. This could involve renegotiating vendor payment terms, implementing automated AR collection processes, or using AI tools to optimize your inventory levels.

When you shorten your cash conversion cycle, you free up cash flow and prove to buyers that your operations are highly efficient. A buyer will pay a higher multiple for a business that requires less working capital to run, because it means they can extract more cash from day one.