LenderHawk analysis. Not affiliated with or endorsed by Acquisitions Anonymous.
Michael Girdley, Bill D'Alessandro, and CPA Mitchell Baldridge break down how small-business owners should think about cash instead of relying on EBITDA alone. The conversation focuses on working capital, cash conversion cycles, lines of credit, and how to build a business that can survive seasonal swings, inventory growth, and debt service.
Small-business buyers and operators who need a practical framework for keeping post-close cash from disappearing in inventory, taxes, debt service, and seasonal working-capital swings.
EBITDA can look healthy while cash is shrinking if growth is consuming inventory or receivables.
A business should be managed from the cash flow statement, not just the income statement or checking balance.
Taxes and interest are real cash drains that EBITDA ignores, especially after an acquisition.
Depreciation and amortization may be non-cash, but they often signal future replacement spending for equipment and assets.
Lines of credit are most useful for smoothing lumpy operations and funding collateralizable assets like inventory, trucks, or machines.
A cash flow model should be built weekly, monthly, and quarterly so the owner sees burn before it becomes a crisis.
Monthly balance-sheet review reveals the biggest hidden cash movements: inventory growth, AR growth, and AP expansion.
Businesses with negative cash-conversion cycles can be easier to scale because customers fund the operation faster than suppliers do.
First keep enough cash in the company to operate. If that fails, fall back to a line of credit, then family support, then equity, with the goal of never reaching bankruptcy.
When to use: Use when designing liquidity backstops for a newly acquired or growing business.
Seasonal sunscreen inventory had to be bought months before summer and then could sit for about six months if sell-through was weak.
Mitchell’s example of a working-capital-heavy consumer brand.
The discussion cites a 10-year interest-only jumbo mortgage as a current hot product in the personal financing market.
Used to illustrate how business and personal leverage decisions interact.
A business owner mentioned that a $150,000 EIDL loan was the difference between losing money and surviving last year.
Example of government support affecting perceived profitability.
One operating example described a year where revenue arrived in one huge year-end sale, with cash concentrated on a single day.
Used to show how deferred revenue and seasonality change cash management.
A Texas land deal over seven figures was financed at roughly 3.5% amortizing over 10 years with about 80% loan-to-value.
Used to show how competitive credit markets can be for asset-backed lending.
A recurring revenue business like ConvertKit was described as collecting most of its income on one day at year-end from customer re-ups.
Illustrates the cash-management challenge of lumpy but high-quality revenue.
Build a cash flow model that projects week-by-week and month-by-month results for the entire year.
Why: A full-year P&L can hide a cash crunch that appears only in the middle of the cycle.
Print monthly balance sheets and cash flow statements over a 12- or 13-month period.
Why: Month-to-month changes in inventory, AR, and AP make the business’s real cash behavior visible.
Use debt for inventory, equipment, trucks, and other assets a bank can collateralize.
Why: Those assets tend to grow with the business and are better matched to borrowed capital than to equity.
Set up a line of credit before you need it.
Why: Lenders are much more willing to extend credit before a crisis than during one.
Loop personal leverage and personal liquidity into the business decision.
Why: A business owner’s home mortgage, living withdrawals, and personal obligations affect how much cash can stay in the company.
Treat tax distributions as mandatory cash planning items, not optional leftovers.
Why: LLC owners can face a tax bill even when cash has been reinvested into inventory or working capital.
Mitchell described nearly bankrupting his sunscreen business in 2015 because seasonal inventory purchases consumed cash even while the income statement stayed positive. The company had to buy months ahead of summer and then hold product for months if sell-through lagged.
Lesson: Inventory growth can silently drain cash even in profitable businesses.
Michael used fireworks as the example of a business that burns cash all year and then generates most of its sales in one burst at the end. That kind of pattern can look profitable on paper while creating severe working-capital pressure.
Lesson: Revenue concentration in a short selling window requires a very different cash plan than steady monthly sales.