The buyer wants to hold back 15 percent of the purchase price in an indemnity escrow for two years to cover potential customer churn. How do we restructure this indemnity holdback into a performance-based price adjustment collar to get our cash faster?

Question

Tyler Smith · Accepted Answer

A massive, long-term indemnity escrow for customer churn is a lazy deal structure that leaves you carrying all the risk. Instead of letting your cash sit idle in an escrow account, propose a performance-based price adjustment collar. This structure establishes an acceptable range of customer retention and adjusts the final purchase price dynamically, returning your cash much faster if your systems perform as promised.

To gain leverage, show the buyer how your EOS Scorecard tracks customer retention and satisfaction on a weekly basis. This proves you have institutionalized systems to prevent churn, reducing their perceived risk.

- Establish a neutral collar zone, such as ninety to ninety-five percent customer retention, where no purchase price adjustment occurs.

- Define a clear, fast-tracked release schedule where escrowed funds are released in quarterly increments based on actual retention metrics.

- Use your EOS® Scorecard history to prove that your customer retention is stable and highly predictable.

This approach aligns the interests of both parties and keeps the focus on operational performance. You get your cash much faster, and the buyer gets real-time protection instead of a rigid, multi-year holdback.