Preparing for Sale? Don't Just Fixate on EBITDA—Cash Flow Counts Too

Here's why it matters for your M&A transaction:

• Buyers expect you to leave behind enough cash to support the normal operating requirements of the business. The amount is negotiated during due diligence and becomes a part of the final deal.

• Excess cash above operating needs typically gets paid out to the seller on completion day. That means. with careful planning, strong cash management can give founders a valuable extra top-up to their sale proceeds, which can be tax efficient.

In the lead-up to a sale, founders should take a closer look at:

• Client credit terms
• Invoicing procedures
• Credit control discipline

A key metric to keep in mind?

Operating cash flow should ideally be around 80/90% of operating profit. Ask your accountant or FD to track this ratio, it’s a powerful indicator of financial health and sale-readiness.

If you're considering a sale in the next 12–36 months, now is the time to start optimising.