Technology Terms Glossary
What is Earn Out?
An earn-out refers to a contractual provision that allows the seller to gain more compensation in the foreseeable future. However, this additional compensation depends on whether or not the business would achieve its specific financial goals and earn a certain percentage of earnings.
Earn Out Benefits
Benefits of Earn Out include:
- Pro 1: The buyer can extend the period to pay back
- Pro 2: The buyer can distribute taxes and reduce the overall tax impact
- Pro 3: The buyer don’t need to pay upfront costs if the earning is not high
Here is a full article about earn out.
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