We have three legacy customers that make up over fifty percent of our revenue, but they refuse to sign long-term agreements. How do we structure a tiered pricing or indemnification clause in the purchase agreement to prevent a massive valuation haircut?

Question

Tyler Smith · Accepted Answer

When you have three legacy accounts driving half your revenue without contracts, buyers see a cliff. They will try to slash your multiple or demand a massive holdback. To combat this, do not just accept their discount. Instead, suggest a tiered earnout or a sliding-scale valuation bridge specifically tied to those three accounts. If all three customers stay for twelve months post-close, you get one hundred percent of the disputed valuation amount. If one leaves, the payout adjusts proportionally. This protects the buyer's downside while keeping your valuation intact if the relationships are as stable as you claim. Simultaneously, you must show the buyer that your business is not dependent on your personal relationships with these clients. Use your EOS Accountability Chart to prove that your Account Managers and Operations team own these accounts. Show the buyer your documented processes for client onboarding and service delivery. If you have integrated AI tools to monitor client health or automate standard deliverables, show them the dashboards. When a buyer sees that your leadership team runs the business through weekly Level 10 Meetings and that the operations are systemized rather than relationship-dependent, their perceived risk drops. This operational maturity helps you hold your ground on the multiple and structure a fair transition bridge instead of accepting a permanent valuation haircut.