Earn-out calculator

Enter the fixed price and the earn-out terms. The tool shows what the seller is paid each year, and in total, if the business falls short of the threshold, lands between threshold and target, hits the target, or beats it.

How the payout is worked out each year: nothing below the threshold; between the threshold and the target the seller gets the payout percentage of every dollar above the threshold; at the target the yearly earn-out is at its full amount; above the target nothing more, and the cap (shared equally across the years) is never exceeded. If the payout percentage times the gap between threshold and target is less than the yearly cap, the seller can never reach the cap: the tool says so. What earn-outs protect, where they go wrong and what to write into the agreement: What is an earn-out?. For the other pieces of a price, see How to structure an acquisition deal.

Questions people ask

How does an earn-out work?
Part of the price is paid later and only if the business hits agreed numbers, usually revenue or EBITDA, over one to three years. Below a threshold the seller gets nothing extra; between the threshold and the target a share of each dollar; at the target the full amount; and a cap limits the total whatever happens above it.

What percentage of a deal is usually an earn-out?
Commonly 10 to 30 percent of the total price, and more when the buyer and seller disagree widely on the forecast. The bigger the earn-out, the more the seller is lending the buyer their own price.

Revenue or EBITDA: which metric is better for the seller?
Revenue, because the buyer cannot lower it by adding costs after closing. Buyers prefer EBITDA because it is the number they actually get. Many deals pair a revenue metric with a minimum margin.

What should the purchase agreement define?
Exactly how the metric is measured (accounting method, what is excluded), who runs the business and with what budget, what happens if the buyer sells again or merges it, when each payment is due, and how disputes are settled. Read What is an earn-out? for the list.

Estimates only: the same yearly result is assumed for every year, payments are not discounted to today's dollars, and the real earn-out follows the definitions in the purchase agreement. Acquisitions.com is an advisory firm, not a broker-dealer or a lender; financing comes from third-party lenders and investors. Not financial advice.