The buyer is requiring me to remain as CEO during a two-year earnout period, but they also want veto power over our budget and hiring decisions. How do we structure our operational governance to protect our earnout from their interference?

Question

Tyler Smith · Accepted Answer

If you are held accountable to earnout targets, you must retain the operational authority to hit them. Giving the buyer veto power over your budget and hiring decisions during an earnout period is a recipe for failure.

To protect your payout, negotiate a clear division of authority in the purchase agreement. Define which decisions require mutual consent and which remain solely with you and your leadership team. Use your Accountability Chart to map out these boundaries.

For example, you should maintain unilateral control over day-to-day operations, including hiring and firing within your approved headcount, and marketing execution. The buyer's veto power should be strictly limited to capital expenditures above a specific threshold or changes to the core business model.

Establish a formal operating committee with representatives from both sides to handle high-level strategic decisions, rather than giving the buyer unilateral veto power. If they block a budgeted hire or operational investment, the agreement should include a clause that automatically reduces your earnout targets. This keeps the incentives aligned.