Earnout is a financing agreement where the seller of a business receives future earnings based on the business`s performance.

Earnouts are used in business sales. They link the seller`s payment to the company`s future success. This way, buyers reduce risk, and sellers can earn more if the business does well.

What is an example of earnout? For example, a business is sold for $1 million upfront. Plus, the seller could get $500,000 more over 5 years if the business keeps growing.

What is an earnout in a business sale? In a business sale, an earnout means the seller gets part of the payment later. This part depends on how well the business performs in the future.

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Earnouts can make business sales smoother. Sellers can get more money if the business does well. Buyers pay less upfront and only pay more if the business succeeds.

Earnouts offer a way to agree on a business`s value. They help both buyer and seller. The seller gets rewarded for the future success, and the buyer reduces risk.