The buyer wants to tie twenty percent of our purchase price to a net retention rate milestone of ninety-five percent over the next twelve months. How do we structure the contract so we are not penalized if their post-close pricing decisions drive our customers away?

Question

Tyler Smith · Accepted Answer

A transaction structured with twenty percent of the purchase price tied to a net retention rate milestone is common, but it can be a disaster if you lose control over how your customers are treated post-close. If the buyer takes over and immediately cuts service staff or raises prices, your retention rates will plummet and you will lose your payout. To protect your milestone, you must negotiate strict operational guardrails in the purchase agreement. First, define net retention rate with absolute precision. Exclude any client departures that occur due to changes in pricing, service level degradation, or product modifications made by the buyer without your written consent. Second, establish veto rights over key operational decisions affecting your legacy clients during the milestone period. Use your EOS Accountability Chart to ensure your client success team remains in their seats and continues running their weekly Level 10 Meetings to maintain high-touch relationships. By embedding these operational covenants directly into the legal agreement, you protect your team's autonomy and ensure the buyer cannot make short-sighted decisions that destroy your retention milestone and wipe out your cash.