Earn Out

The Bigger Picture In Selling Your Business

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What Does Earn-Out Mean?

A contractual agreement between the seller and the buyer of a business stipulating that part of the business purchase price will be paid contingent upon the business achieving specified and agreed future earnings subsequent to the sale.

As a negotiated contract term, earn-out helps the seller secure a higher purchase price than would have been the case without it.

As standard practice, earn-out usually ranges from 10% to 50% of the purchase price, and can be for one to three years depending on seller-buyer negotiations.

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