Benefits of an Earnout
When you are acquiring a business, there’s two avenues to approach it with.
Buy the business outright and get it for a better deal with all cash upfront.
Or acquire it at a bigger price with money down and the rest as an earnout.
The earnout allows you to acquire a business and stretch payments over time, building you runway to build the business and enhance it beyond what you acquired it at.
It obviously can be troublesome to have to owe somebody but you allow yourself time to build the business by pouring some capital in to the growth of the business.
An earnout can be done in several ways.
One is a guaranteed earnout paying out $X over Z months.
Another is a performance based earnout where you participate in the % of sales.
Another type of earnout is where you collect in a % of sales or profits that go above baseline. This is where you determine a base level amount whereby anything that goes above it will be attributed to the earnout portion.
Most great earn-out structures can include all of the above to get a deal done.
While the best deals are simple, the best way to get a deal done is to incentivize the seller to feel like they are getting an amazing deal.
If you would like to hop on a call with us to go over things related to acquisitions and general business overview, please schedule a time here. We do a one hour deep dive where we go over your needs as it relates to acquisitions & business expansion, and then we go on the hunt for you to line up a business that fits.
Contact us for your next acquisition:
Email – email@example.com
Phone – (800) 773-1523
We look forward to helping you with your next buy or sell opportunity.
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Leader in Acquisitions with Expertise in Representing Sellers & Buyers on Deals
Jarbly is a leader in acquisitions with expertise in helping with listings, negotiations, LOI's, asset purchases, company purchases, and real estate purchases. JARBLY has access to high net worth individuals if you are on the sell-side and businesses that may be of interest to you if you are on the buy-side.