What is an earn-out?
An earn-out is part of a purchase price paid later, only if the acquired business hits agreed targets such as revenue or EBITDA. It bridges the gap between an optimistic seller and a cautious buyer: the buyer pays a base price at closing, and the rest depends on results over the following years. Buyers also use earn-outs to keep sellers engaged after the deal.
Why it matters to a revenue leader
Earn-outs shape behavior inside the sales team. A selling founder paid on revenue may chase low-margin work, or resist moving accounts into the platform's process until the earn-out ends. A CRO integrating an add-on should know the targets, the measurement period and who controls the decisions that affect them, because disputes often turn on exactly those points.
Example
Fictitious numbersA platform buys an inspection company for $12M at closing plus up to $4M if the business reaches $3M of EBITDA within two years. The founder runs sales during that period. The CRO and founder agree in writing which accounts move to the platform's team and how their revenue counts toward the target.
"Do any earn-outs at our acquired companies reward behavior that conflicts with the platform's sales plan?"
Sources
- Earnout checked 9 Oct 2026