Built to Sell Radio Ep 510 Mastering the Deal: Earn-outs, Equity Rolls & Seller Notes—Risk or Reward?
Sep 5, 2025
The tug-of-war between sellers craving 100% cash and buyers opting for earn-outs sets the stage for intense negotiations. Delve into how manageable milestones can make cash offers more appealing. Discover the pros and cons of rolling equity, where sellers face trade-offs between potential wealth and loss of control. Learn how seller financing can enhance negotiations, offering unique benefits and risks. Navigate the complexities of these transition structures to turn challenges into opportunities.
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Negotiation Is A Risk Tug-Of-War
- Buyers typically push to hold back as much cash as possible to shift risk onto sellers during a sale.
- That tug-of-war between seller desire for cash and buyer risk-aversion defines much of the negotiation.
Treat Earnouts As Contingent Payments
- Treat earnouts as contingent payments you only receive if agreed targets are met.
- Push for clear, achievable targets and understand how much of your proceeds are at risk.
Rob Walling's Feature-Based Earnout
- Rob Walling sold Drip to Leadpages and had an earnout tied to launching specific product features.
- He preferred feature milestones over revenue or profit targets because they were within his control.
