What should a consultancy founder expect from an earnout when selling a £10M revenue business?

What Should a Consultancy Founder Expect From an Earnout at £10M Revenue?

If you run a consultancy doing around £10M in revenue and £2.7M EBIT and you're exploring a sale, the earnout question is really a more important one in disguise: how much of your deal value is real money at close versus money you might never see?

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What Is Your Consultancy Actually Worth?

Before unpacking earnout mechanics, you need a valuation anchor.

At £2.7M EBIT, a consultancy at this scale typically trades at 4–7x EBIT, putting headline value in the range of £10.8M–£18.9M. The multiple skews toward the higher end when:

• You have recurring retainer revenue rather than project-by-project work
• No single client represents a dangerous concentration of revenue
• A leadership team exists that can operate without the founder in the room

That last point matters enormously — and we will come back to it.

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How Earnouts Are Typically Structured at This Deal Size

Earnout as a Percentage of Total Consideration

In the market for consultancies at this revenue and profit level, earnouts typically represent 20–40% of headline deal value.

On a £14M deal, that means £3M–£5M is deferred. If a buyer is pushing the earnout above 40% of total consideration, treat it as a red flag — it usually signals the buyer does not believe the number they put on paper.

Duration

2–3 years is standard. Anything beyond three years should either be repriced as a performance bonus structure or walked away from entirely. The longer the earnout window, the more opportunity for circumstances outside your control to erode the targets.

Metrics

Buyers typically tie earnouts to revenue or EBIT targets benchmarked against your current trajectory. The structural trap here is subtle: targets are set just above where you are today — technically achievable in isolation — but post-acquisition you lose direct control over pricing decisions, hiring, and key client relationships.

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Why Most Earnouts Fail: The Buyer's Discount in Disguise

"Earn-outs are not common to get. If you get an earn-out offer, you have to expect that you're most likely not going to see the earn-out."

This is the pattern experienced operators describe repeatedly. A buyer pays what looks like a full multiple on paper, then installs their own processes, restricts your sales motion, and the earnout targets quietly slip out of reach — not because you underperformed, but because the levers you needed were no longer yours to pull.

One founder who sold his consultancy to a strategic buyer estimates that nine out of ten earnouts fail to pay out in full — not due to founder underperformance, but because inside a larger organisation the autonomy required to hit the targets simply disappears.

The earnout is often where buyers quietly recover their discount. Understanding this reframes how you should approach negotiations.

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How to Negotiate an Earnout Intelligently

Prioritize Cash at Close

The primary negotiating objective should be maximizing cash at close, even if it means accepting a modestly lower headline number. A guaranteed £11M is structurally superior to a £14M deal where £5M is contingent.

If the Buyer Insists on a Large Earnout, Push for Three Things

1. Metrics you directly control — revenue from clients you manage, not blended company-wide targets influenced by decisions made above you 2. A real seat and real authority post-close — veto rights or meaningful operational control, not just a title 3. Acceleration clauses — if the buyer materially changes your role, restructures the business, or removes you from a leadership position, the remaining earnout should accelerate and vest immediately

Watch the Dependency Question Closely

Before going to market, the single most important de-risking move is examining how dependent that £2.7M EBIT is on the founder personally. If revenue walks in the door because of your relationships and your reputation, buyers will use that dependency to justify a larger earnout — and they will be right to do so. Building a second layer of leadership and client ownership before a sale process begins directly reduces the earnout pressure buyers can apply.

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Key Takeaways

• Consultancies at £2.7M EBIT trade at 4–7x, giving a headline range of roughly £10.8M–£18.9M
• Expect earnouts to cover 20–40% of total consideration over 2–3 years
• Earnouts above 40% of deal value signal buyer skepticism about their own offer
• Most earnouts do not pay out in full — treat deferred consideration as upside, not baseline value
• Negotiate hard for cash at close, metrics you control, real post-close authority, and acceleration clauses
• Founder dependency is the variable buyers use to size the earnout — de-risk it before going to market