Ask most advisors when a business owner becomes a great client, and you'll hear some version of the same answer: after the sale.
It's an understandable view. Before an exit, an owner's wealth is tied up in something an advisor can't manage. After the exit, it's cash, and cash can be invested. So the industry has organized itself around the liquidity event. Build the relationship, stay close, and be ready when the cheque clears.
I think that timing is backwards. The exit matters; it is often the largest financial event of an owner's life. But a large share of the opportunity is already sitting in the business today, as cash.
Where the money actually is
Look at the balance sheet of a healthy, established private business and you will often find more cash than it needs to run. Some of it is deliberate: a cushion for a bad quarter, a reserve for an expansion that may or may not happen. Much of it is simply accumulated. Profitable years leave cash behind, and nobody has a reason to move it.
Every business needs working capital. It covers payables and payroll, carries inventory, and bridges the gap between sending an invoice and getting paid. How much a business needs depends on its industry, its size and how it operates. A distributor carrying stock needs more than a consulting firm that bills monthly.
Cash well above that requirement is excess working capital. It isn't funding operations, and it isn't growing the business. For the owner, it is often earning little and working toward nothing in particular. In the owner's financial plan, it frequently doesn't appear at all, because no one has measured it.
Why it has to move
There is a second reason this cash matters, and it should change how advisors think about timing.
When a business is sold, buyers pay for the operating business: its earnings, customers, people and prospects. They don't pay a premium for a pile of cash they could hold themselves. Deals are commonly structured so that excess cash is dealt with before or at closing.
That means the cash has to come out before the exit, and it needs somewhere to go. How and when it comes out affects how much the owner keeps, which is a conversation for the owner, their advisor and their accountant together. The direction isn't in question, though. The money is going to move. The only question is whether an advisor is part of the plan when it does.
An advisor who waits for the sale isn't just late to the liquidity event. They've missed the decisions about the cash that was there all along.
What changes when you can size it
This opportunity hasn't been overlooked because advisors don't care. It's been overlooked because they rarely have the numbers. "You probably have some cash sitting in the company" is an observation, and it doesn't lead anywhere. Owners have heard it before, and most of them are busy running the business.
A specific number is different. When an advisor can show an owner how much working capital the business needs, how much it holds and the difference between the two, the conversation stops being speculative. It becomes a planning conversation with a real figure attached: here is what's idle, here is what it could be doing, and here is how it fits your goals.
This is the problem we built interVal to solve. interVal calculates the excess working capital in every business it analyzes, measured against what that business requires, alongside a valuation and a view of business health. For an advisor, a vague opportunity becomes a concrete one, well before any exit is on the calendar.
Three conversations that open up
Once the cash is visible, several conversations can happen years earlier than they usually do.
Putting idle cash to work. Excess capital can be reinvested in the business, distributed to shareholders or brought into a managed plan. Each choice has trade-offs, and the advisor can help the owner weigh them with the full picture in view.
Protection sized to reality. Insurance for owners depends on what the business is worth. With a defensible valuation, coverage can be sized to actual value rather than an old or optimistic estimate.
Planning ahead of the exit. Valuation trends over time show when an owner is approaching a transition. An advisor who sees that early can plan with the owner instead of competing for the proceeds afterward.
None of these require the owner to sell anything. They require the advisor to see inside the business.
Value beyond returns
There's a broader reason this matters for wealth firms right now. Fees tied to investment returns face more scrutiny, and clients are getting clearer information about what they pay. Advisors increasingly need to show value beyond portfolio performance.
For business-owner clients, the most meaningful value is insight into their largest asset. An advisor who can tell an owner what the business is worth, how healthy it is and how much of their wealth is sitting idle inside it is offering something returns alone can't.
The cash is already there
Business owners are a significant market at exit. They are also a market today, and the evidence is on their balance sheets.
The firms that do best with business owners over the coming years won't be the ones with the best pitch after the sale. They'll be the ones who were in the room long before it, with a clear view of the business and a plan for the cash that was already there.
Frequently Asked Questions
What is excess working capital?
Excess working capital is cash a business holds beyond what it needs to run day to day. Working capital covers payables, payroll, inventory and the gap between invoicing and getting paid. The requirement varies by industry, size and operating model, so excess is measured against what that particular business needs.
Why does excess cash in a business matter to a financial advisor?
It is often a significant share of an owner's wealth, yet it rarely appears in their financial plan. Once it is sized, an advisor can help the owner decide whether to reinvest it, distribute it or bring it into a managed plan, years before any sale.
Why does excess cash usually come out before a business is sold?
Buyers generally pay for the operating business, meaning its earnings, customers and people, not for cash they could hold themselves. Deals are commonly structured so excess cash is dealt with before or at closing, so owners need a plan for where it goes.
What can a business owner do with excess working capital?
Common options are reinvesting in the business, distributing it to shareholders or moving it into a managed investment plan. Each has trade-offs, including tax implications, so owners should decide with their advisor and accountant together.
How does a business valuation help with insurance planning?
Key person coverage, buy-sell funding and estate protection are all sized against what the business is worth. A defensible valuation replaces outdated or optimistic estimates, so protection gaps can be identified and sized accurately.
When should advisors start exit planning with business owners?
Well before a sale is on the table. Valuation trends over time can show when an owner is approaching a transition. Starting early lets the advisor plan timing, cash and protection with the owner rather than competing for the proceeds afterward.
How does interVal identify excess working capital?
interVal calculates excess working capital for every business it analyzes by measuring the cash a business holds against what it requires. It shows this alongside a valuation and a view of business health, giving advisors a specific figure to bring into planning conversations.