When to Use an Earnout Provision

By Acquisitions

An earnout is the method of paying the seller of a company based on that company’s future earnings. The earnout will call for additional payments to the seller if the company’s post-sale earnings reach a certain level.

The earnout is useful when buyer and seller do not agree about the company’s future profit stream. A buyer should be willing to pay a higher price for greater future profit, if realized, allowing the seller to get paid the company’s full value as the seller represented at the time of the deal.


Startup Law doesn’t have to be a confusing maze. The practical knowledge in "Acceleration: What All Entrepreneurs Must Know About Startup Law" will help you make the smart decisions to protect your startup and its future. Available in ebook and hardcover.

Buy the Book on Amazon
You Might Also Like:  How To Optimize Your Blog Sale

Tagged under: