We have received an acquisition offer that is highly weighted toward a three-year earn-out. How do we use Keith Cunningham's Thinking Time to evaluate if our current operating system can sustain the stress of these post-sale performance metrics?

Question

Tyler Smith · Accepted Answer

An earn-out can look highly attractive on paper, but it is often a trap. If your post-sale payout depends on hitting aggressive performance targets, you are essentially agreeing to run a high-stress marathon under a new boss who may have very different operational values.

Before you sign, schedule dedicated Thinking Time sessions. Sit in a quiet room with a pen and a pad of paper, and ask yourself high-value questions:

- How might the buyer's post-sale integration disrupt our core processes?

- What happens to our operating margins if the buyer forces us to use their expensive corporate vendors?

- If our Integrator or key managers quit because of the cultural shift, do we have the redundancy to hit our targets?

Convert these challenges into solvable questions rather than treating them as unavoidable predicaments. For example, instead of worrying about manager retention, ask: how might we structure a post-sale incentive plan that aligns our team's financial rewards with the earn-out targets?

Evaluate whether your current EOS processes can handle the additional reporting burden. If your systems are fragile, a sophisticated buyer will easily exploit those gaps, and you will pay a massive dumb tax in the form of a missed payout.

By using Thinking Time to pressure-test the deal structure, you can negotiate protective clauses that shield your team and your payout from circumstances beyond your control.