A buyer agrees to our valuation but wants to put twenty percent of the purchase price into a customer concentration escrow that only releases if our top three clients renew their contracts next year. How do we structure this escrow to ensure we do not lose the payout due to factors outside of our control?

Question

Tyler Smith · Accepted Answer

Accepting a customer concentration escrow is risky because post-close operational decisions are no longer entirely yours. To protect your proceeds, you must establish clear guardrails. First, define contract renewal strictly. If a client continues doing business, accepts invoices, or signs a modified agreement, it counts as a renewal. The definition must not allow the buyer to trigger a default by unilaterally raising prices or altering service-level agreements to force a client exit. Second, write operational covenants into the purchase agreement. Your team must retain control over client delivery for these key accounts. Use your EOS Accountability Chart to clearly define who owns the client relationship, and ensure these roles remain occupied by your key people. If the buyer reassigns these relationship managers or cuts customer-support resources, the escrow must immediately release to you. Third, tie the escrow to a sliding scale rather than an all-or-nothing milestone. If two of the three clients renew, you should receive a proportional payout. Track the health of these relationships on your weekly Scorecard using specific leading indicators like customer satisfaction scores or project delivery milestones. By making the escrow release dependent on objective performance metrics within your control, you prevent the buyer from using their own operational incompetence as an excuse to pocket your cash.