You’ve found a great business and spent weeks negotiating, with everything moving forward…
Until you hit a wall on valuation.
The seller believes the business is worth $1.2M based on growth potential.
You’re only willing to pay $1M based on current performance.
This is where most buyers walk away thinking the deal is dead.
But there’s a better solution that protects both parties, with performance-based pricing.
Instead of fighting over a single number, you can structure the deal so the final price depends on actual results.
Option 1: Earnouts
The seller gets paid more only if the business hits specific targets after closing.
Here’s how that would work:
You pay $1M upfront.
If revenue grows 15% year-over-year for the next two years, the seller gets an additional $200K.
This aligns everyone’s interests - the seller wants you to succeed because their payout depends on it.
They’ll typically stay involved during the earnout period to help ensure targets are met.
The catch here is that SBA loans don’t allow earnout structures.
If you’re using SBA financing, you’ll need an alternative approach.
(Inside Acquisition Ace, members learn exactly when to use earnouts versus other deal structures, plus how to negotiate terms that work. Want to learn these strategies? Book a call with our team here.)
When to Use These Structures
Performance-based pricing works best when:
- You and the seller have different views on future growth
- The business has untapped potential but unproven
- The seller is willing to stay involved post-closing
- You need to bridge a valuation gap to get the deal done
How to Structure the Terms
Keep metrics simple and objective:
- Revenue, EBITDA, or customer retention
- Avoid subjective measures that create disputes later
- Set realistic targets
- Typical timeframes: 1-3 years for earnouts, 12-24 months for forgivable notes
All this to say…
When price becomes a sticking point, don’t assume the deal is dead.
Creative deal structures let you say yes to opportunities you’d otherwise walk away from, while protecting yourself from overpaying.
If you want to learn how to structure creative financing deals in the Acquisition Ace community (with 2,000+ other members)…
👉 Book a call with my team to see if you’d be a good fit.
Onward,
— Ben Kelly
