The Hidden “Price Chip”: Is Your Working Capital Target Killing Your Exit Value?

You’ve spent years building your business. You’ve finally found a buyer. You’ve agreed on a £3M headline price. You think the hard part is over.

It isn’t.

In the final 48 hours before completion, many UK SME owners watch helplessly as tens of thousands of pounds are “chipped” away from their exit proceeds. The culprit? An aggressively defined Working Capital Target.

At Consult EFC, we see this play out constantly. The headline price is vanity; the Net Working Capital (NWC) adjustment is reality. If you don’t define “normal” trading levels early, the buyer’s accountants will define them for you—and their version of “normal” usually involves you leaving more of your cash in the business for free.

The “Van and the Fuel” Trap

Think of selling your business like selling a commercial van.

• The Buyer expects enough fuel to get to work on Monday morning.
• The Seller doesn’t want to hand over a full tank for free.

A Working Capital Target (or “the Peg”) is that fuel. If you hand over the keys and the tank is lower than agreed, the buyer docks your sale price pound-for-pound. If it’s higher, you get a bonus.

The problem? Most owners don’t realize the buyer is trying to redefine the size of the “tank” while the deal is closing. In a high-stakes UK business sale, what you consider “extra cash” the buyer may claim as “required liquidity.”

How the “Peg” Becomes a Weapon

Most UK deals are structured on a Cash-Free, Debt-Free basis. This sounds simple, but it creates a massive gray area around “Trading Capital”—the stock, debtors, and cash needed to keep the lights on.

Here is where your exit value leaks:

• The 12-Month Trap: Buyers love a 12-month average because it’s easy. But if your business is seasonal or growing fast in 2026, a 12-month average is a trap that forces you to leave surplus value behind.
• The “Dirty” Balance Sheet: Aged debtors that will never pay or obsolete stock sitting in a warehouse. If these stay in the calculation, the buyer will “haircut” them, reducing your final payout.
• The VAT & Payroll Oversight: At Consult EFC, we often find VAT and payroll accruals are the biggest points of contention. If these aren’t explicitly carved out of the definition, you are essentially paying the buyer’s future tax bills out of your own pocket.

Protecting Your Exit: The Consult EFC Approach

As an ICAEW Chartered Accountant, I don’t just “look at the books.” I defend the value you’ve spent a lifetime building. To avoid a late-stage price chip, we focus on three defensive pillars:

1. Normalize the Data: We strip out one-off stock builds or “problem” clients before the buyer ever sees the numbers. We set the narrative, not them.
2. Define the SPA Rules: We ensure the Sale and Purchase Agreement (SPA) uses your specific accounting policies, not a buyer’s “idealized” version that favors their pocketbook.
3. Stress-Test the Peg: We run “what-if” scenarios. If the deal slips by two weeks, does it cost you £20,000? You need to know that answer before you sign the Heads of Terms.

The Final Battleground

Working capital isn’t an “accounting detail”—it is the final battleground of your business sale. By the time you get to completion accounts, it’s often too late to argue. The work of protecting your millions starts months before the first offer arrives.

Is your business “Sale-Ready” or are you leaving money on the table?

Don’t let a buyer’s accountant dictate the value of your life’s work.

Would you like me to perform a “Working Capital Stress Test” on your current balance sheet to see if your exit value is at risk?

Kishen Patel, BFP ACA Founder, Consult EFC · ICAEW Chartered Accountant

Over 12 years across Big Four audit, Investment Banking and corporate advisory. Kishen works with UK SMEs on valuations, exit planning, fundraising and financial strategy. ICAEW regulated. Big Four trained. Based in London.