We are negotiating a deal structure that includes a significant earnout tied to future EBITDA targets. How do we structure the operational control clauses in the purchase agreement so the buyer cannot starve our division of resources and cause us to miss our targets?

Question

Tyler Smith · Accepted Answer

To protect your earnout, you must secure operational control over the resources required to hit your targets. Many founders sign earnouts only to watch the buyer starve their division of marketing budget, fire key personnel, or divert sales leads, making the earnout targets impossible to reach. You can prevent this by embedding your operational framework directly into the purchase agreement. Negotiate clauses that guarantee your division will operate as a semi-autonomous business unit with its own budget and dedicated resources. Use your V/TO and your annual budget as the baseline for these resource commitments. Ensure the purchase agreement specifies that your leadership team retains the authority to hire and fire key personnel within your Accountability Chart. By using your established operating system as the governance model for the post-closing transition period, you prevent the buyer from micromanaging or disrupting your team. This operational autonomy ensures you have the tools, the people, and the authority needed to execute your strategy and secure your earnout.