Earnout Traps
Earnouts bridge price gaps. You lose control. Buyer roadmap changes can cause you to miss financial targets.
What is Golden Handcuffs?
Golden Handcuffs is Money that forces you to stay at a job you dislike.
The 3 Core Benefits
Higher Valuation
Earnouts can reach the valuation you want. They reduce buyer risk.
Smooth Transition
You help the team adapt to the new owner. Products transition safely.
Budget Access
Buyers often provide larger budgets to hit shared growth goals.
Protecting Payouts
Revenue Targets
Tie targets to top-line sales. Avoid profit targets which buyers can manipulate.
Budget Guarantees
Demand fixed marketing budgets. You cannot hit goals without resources.
Short Periods
Keep the earnout period short. One year is manageable. Three years is too long.
Vague Promises vs. Ironclad Terms
| Feature | Vague Promises | Ironclad Terms |
|---|---|---|
| Target | Profit | Gross Revenue |
| Duration | Long | Short |
Frequently Asked Questions
Are they common?
Yes. They bridge gaps when valuations disagree on future value.
Can I refuse?
Yes. Prefer a lower price for one hundred percent cash upfront.
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