But for small business buyers, the lesson is clear: the financial statements tell one story, but cash flow and working capital metrics tell another—often more accurate—story. In my due diligence practice, I've saved clients from disastrous acquisitions by identifying exactly these patterns: great reported earnings, terrible cash conversion.

One of the biggest blind spots I see in small-business acquisitions isn’t revenue, margins, or even cash flow. It’s Net Working Capital, and more specifically, its trend.