What's at Stake
When you sell your business, the buyer pays you a portion of the sale price at close and the rest typically comes through an earnout. How the earnout is structured is critical and usually favors the buyer.
What's learned in diligence and the quality of earnings gives the buyer insight into where they can reduce costs, improve efficiency, increase revenue and profitability.
This is where they see value. The potential to create a business worth more than what they paid you - it's called "buying at a discount". There's nothing wrong with this provided you understand.
The question is how will they acheive this? The answer is it will all be driven by changes they will make to your business, your people, your processes, your pricing, your cost structure. But they said "nothing changes", right?
Can you achieve your earnout after all these changes are implemented? Will your people, customers and business survive the changes and stay long enough for you to earn the full amount?
If not, you could lose your earnout and the buyer loses value. This is the risk you and the buyer take.
(Chris Totter from CT Acquisitions has an excellent article on the percentage of earnout dollars buyers actually payout to owners. https://ctacquisitions.com/guides/founder-earnout-benchmarks-by-deal-size-2026/)
Unless you're very careful, the buyer always has the upper hand in any acquisition deal. If not, they walk away.