Earnout

A sale structure where part of the price is paid later, conditional on the business hitting agreed performance targets after the handover.

An earnout bridges a price gap: the buyer pays part now and part later if revenue or profit targets are met. It transfers risk to the seller, who no longer controls the business whose performance decides the payment.

Earnouts are common and legitimate, and they go wrong in predictable ways: vague metric definitions, targets the buyer's own decisions can undermine, and horizons so long the seller is effectively an unpaid partner. If you accept one, insist on precisely defined metrics from named systems, a short horizon, protections on how the business will be run, and a price you could live with if the earnout paid zero.

A strong, provable track record shrinks the need for an earnout in the first place, which is one more return on clean books.