Earnouts

You closed. You got a headline number. 30% of it is an earnout tied to revenue targets over 24 months.

An earnout is money the buyer pays you after closing, only if you hit future performance targets. Founders should treat earnouts as money they will never see — because nine out of ten fail — and negotiate to maximize cash at close instead.

Most earn-outs fail — experienced advisors estimate nine out of ten never fully pay. If you must accept one, keep it to 12 months or less, tie it to metrics you control (gross revenue over EBITDA), and negotiate hard operating covenants that prevent the buyer from undermining your ability to hit targets.

At £2.7M EBIT, a consultancy typically sells for 4–7x, with earnouts covering 20–40% of total consideration over 2–3 years. Treat the earnout as potential upside, not guaranteed purchase price — and negotiate hard to maximize cash at close, because most earnouts are never fully paid out.

Most earnouts fail because founders agree to metrics they can't control after the acquisition closes. To maximize your chances of seeing that money, keep the earnout short (12–18 months), tie targets only to the business unit you directly manage, and negotiate the resources and autonomy you need into the deal documents before signing.