Earnout

An earnout is a portion of the purchase price that's contingent on what happens after the sale. The buyer pays you part of the price at closing, and the rest only if the business hits agreed-upon targets — usually revenue, profit, or specific milestones over the next one to three years. If the targets are met, you get paid. If they're missed, you don't. Earnouts typically range from 10% to 30% of the deal, sometimes more when the buyer thinks the business is risky or growing fast.

An earnout splits your sale price into two pieces — what you're paid at closing, and what you might be paid later. The headline number and the take-home number are not the same.

Buyers propose earnouts when they're not fully convinced your earnings are real or your growth is sustainable.