Earnout vs Cash at Close
A higher headline price with an earnout often beats a lower all-cash offer — until you do the math.
Cash at close is the money that hits your bank account on the day the deal closes. Earnout is money you might receive over the next 1–3 years if specific targets are met. Two offers can have the same headline price but pay out very differently: $2M all cash at close puts $2M in your account on day one. $2M with $1.2M cash at close and an $800K three-year earnout puts $1.2M in your account on day one and turns the rest into a future maybe. The seller's job is to know which one they actually have on the table.
Two offers with the same headline price can produce very different outcomes depending on how much is cash and how much is contingent.
Buyers who push hard for an earnout structure are telling you something about how they see the business — usually that they don't fully trust the earnings or the transition.
Find out what a buyer would see in your business — before you talk to one.
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