The buyer is proposing a two-year earnout tied to gross revenue targets, but we are worried they will starve our sales department of lead-generation resources post-close. How do we structure the deal to protect our revenue targets?

Question

Tyler Smith · Accepted Answer

When you agree to a revenue-based earnout, you are making a dangerous bet on the buyer's ability to support your sales engine. If the buyer cuts your marketing budget or reallocates your lead generators, you will miss your targets through no fault of your own. You must protect your upside by hard-coding operational covenants into the purchase agreement.

First, negotiate a resource commitment clause that legally obligates the buyer to maintain a minimum baseline of marketing spend and sales head count. This baseline should match the historical operating budgets documented in your V/TO®.

Second, demand that your post-close operating unit retains complete control over its sales process. Use your EOS Accountability Chart to define who has the authority over lead generation and sales conversion. If the buyer integrates your sales team into their corporate structure, the earnout must immediately accelerate and pay out in full.

Third, establish that any cross-selling of the buyer's other products by your team counts toward your earnout targets. If your people spend time selling the buyer's catalog, your revenue credit must reflect that effort. Do not let the buyer distract your team from their Rocks without compensating you for the diverted capacity. Keeping the lines of accountability clean is the only way to ensure you actually see that earnout money.