20 Golden Nuggets - The Earn-Out.

16. Staying Involved -  The Power of Earn-Outs

An earn-out is a common exit strategy where the seller stays involved in the business post-sale and receives additional payments based on the company's performance over time. While earn-outs can provide the opportunity to maximise your exit value, they also come with certain risks.

The key benefit of an earn-out is that it can align the interests of both the buyer and the seller. You, as the seller, have the opportunity to boost the sale price by helping the business succeed under new ownership. This can be particularly useful if the buyer is concerned about the business’s future performance without you.

However, earn-outs are not without risk. The buyer may make strategic decisions that are outside of your control but impact the earn-out payments. Additionally, earn-outs can create friction if the buyer and seller disagree on the direction of the business. It’s crucial to have clear, legally binding terms for the earn-out to ensure you are compensated fairly.

Golden Nugget -  Earn-outs can help you maximise your exit value, but they come with risks. Ensure clear terms are in place to protect your interests.