How To Structure Your Earn-Out | Built to Sell Radio

An earn-out is traditionally tied to the profitability of you company and they are fraught with problems. In this episode, you’ll hear from Mac Lackey, a veteran entrepreneur who took an alternative approach to structuring the earn-out.

   

In an earn-out, a portion of your business’ sale price is set aside for payment in the future if you reach certain goals set by the acquirer; you’ll need to stay on for a few years as an employee of the acquiring company and lead your team to hit the earn-out goals.

Most owners would prefer all of their cash the day they sell their business and most buyers would prefer to pay the entire amount contingent on future performance. Deals get done somewhere in the middle, where some portion of your money is paid up front with another slice available if you meet your goals as a division of the acquiring company.

Traditional earn-outs are typically tied to the profitability of your company as a division of the new owner and they are fraught with problems. Buyers may thwart your ability to hit your targets in any number of ways. In this episode of Built to Sell Radio, you’ll hear from Mac Lackey, a veteran entrepreneur who took an alternative approach to structuring the earn-out that put up to 80% of the sale of his company, Kyck.com, at risk.

You’ll learn the surprising approach Lackey took to structuring his earn-out in order to maximize his shot at hitting his target.

How to minimize your earn-out

Generally speaking, the higher your Value Builder Score, the lower the proportion of your deal that will likely be at risk in an earn-out. To get your score, take 13 minutes and complete the Value Builder questionnaire.

Learn How To Structure Your #EarnOut in this week’s episode of #BuiltToSell Radio with @maclackey.

To hear the entire episode on iTunes, click here and don’t forget to subscribe! You can also find us on Stitcher , Soundcloud, or anywhere podcasts are found!

At Built to Sell we’re all about shifting the balance of power from the buyer to the seller. If you support our mission, please write a review on iTunes—and if you have any comments or questions you can find us on Twitter and Facebook. Tune in every Wednesday for another episode of #BuiltToSell Radio with John Warrillow.

Article LINK

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com.