March 22, 2019 Glossary

A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals. An earn-out is a mutually beneficial tool to getting a deal done if it is structured appropriately. It maximizes the selling price for the Seller and it matches the Company's future earnings with the payments made to the Seller. An earn-out should not provide a financial "burden" on the Company, but should be structured as a sharing of the wealth. An earn-out becomes easier for a Seller to accept as he/she gets more comfortable with the Buyer. Trust must be established between the parties with face-to-face time.