Our largest customer represents thirty-five percent of our revenue. The buyer wants to hold back fifteen percent of our cash at close in a dedicated customer loss escrow for two years. How do we negotiate a sliding scale or burn-down structure to release these funds early?

Question

Tyler Smith · Accepted Answer

Undergoing an exit with significant customer concentration means the buyer sees a major predicament rather than a solvable problem. They want to shift one hundred percent of that risk onto your shoulders. To protect your cash, do not accept a flat two-year lockup. Instead, negotiate a milestone-based burn-down mechanism tied to specific operational touchpoints. Use your V/TO and your Accountability Chart to demonstrate that the customer relationship is held by your entire account management team, not just you. Frame the escrow release around transition milestones. For instance, structure the agreement so that one-third of the escrowed funds are released after the first six months once you successfully complete a formal joint transition meeting. Release the next third at twelve months if the customer maintains at least eighty percent of their trailing twelve-month order volume. Release the final third at eighteen months. Additionally, insert a clause that automatically triggers a full release if the buyer makes any material changes to the pricing, service levels, or delivery team for that client, as their own operational missteps should not cost you your exit proceeds. Take some dedicated Thinking Time to map out these operational milestones. By shifting the conversation from an arbitrary timeline to objective performance metrics, you de-risk your cash at close while proving the durability of your customer integration.