Earnout
Written by Christopher Krassnig - Founder - Kairos Exchange and ZenoX Media.
Published
- Checks in every memo8
- Automatic on day one3 of 8
- Read by handad spend and processor payouts
- Tracked ecom salesEUR 200M+ZenoX ad-management figures, not Kairos deal volume - Kairos hasn't closed a deal yet.
Earnout is a payment made after closing, tied to the store hitting agreed revenue or profit targets under the new owner. Buyers and their lenders will not pay upfront for growth that has not happened yet, so it lets the seller share in the upside if it does happen. Unlike a fixed seller note, it pays only when the target is actually met.
What Makes One Work
Every earnout needs a metric both sides can check against the same source data, revenue or profit read straight off the order ledger, never a number one side has to take the other's word on. Disputes happen for three predictable reasons: the metric was left vague, the buyer changed how the business runs during the earnout period in a way that moved the number, or nobody agreed in writing what happens when the new owner's own decisions affect the result. Writing the metric and the measurement source into the agreement before signing is what prevents all three.
Not to Be Confused With
- Seller Note
- a seller note pays on a fixed schedule regardless of performance; an earnout only pays if the store actually hits its target. Confuse them and a seller books an earnout as a fixed receivable, then finds a slow quarter erases the payment entirely.