Thinking Ahead The most important number in an offer to buy your business By John Warrillow When you get an offer to buy your company, the term sheet will outline what the buyer is willing to pay for your business. Most entrepreneurs fixate on the purchase price and the multiple of earnings used to calculate it. There is a second number in most term sheets that is almost as important as the purchase price: the working capital calculation. I was guilty of ignoring the working capital reference in the term sheets I received in the process of selling my research company last year. To be honest, I didn't know what exactly they meant by "working capital". I had two competing offers to evaluate and spent most of my time on the purchase prices being offered by both parties. I ignored the rest of the verbiage in the two offers. It was my accountant who pointed out the difference in the way the two offers calculated the working capital they were asking me to leave in the business. One was allowing me to take a generous amount of cash out of the business before closing, making the offer much more attractive than I had first thought. In fact, the way this party was offering to calculate working capital had the effect of increasing the cash value of the offer by a full 15 percent. Working capital is the money you need to keep in the business to ensure your company can