
Ultimate Guide to Earnouts in SMB Acquisitions
Earnouts are increasingly used in SMB acquisitions to bridge valuation gaps between buyers and sellers by tying a portion of the purchase price to the company’s future performance. They align both parties’ interests by balancing risk and reward—buyers reduce upfront exposure while sellers have the opportunity to earn more if the business performs well. However, success depends on clearly defined performance metrics, timelines, and payment structures to minimize disputes and ensure transparency throughout the earnout period.