Know the Metrics Inside and Out

Understand exactly how your earnout is calculated:

• Revenue-based: What counts as revenue? Recurring vs one-time? Gross vs net?
• EBITDA-based: What expenses are included/excluded? How are adjustments made?
• User/customer growth: Active users? Paying customers? How are churned users handled?
• Product milestones: What constitutes completion? Who decides?

Critical: Get all calculation details in writing and document assumptions

Track Performance Constantly

Don't wait for quarterly reports—monitor your metrics daily/weekly:

• Build your own tracking dashboards
• Reconcile with buyer's numbers regularly
• Address discrepancies immediately
• Keep detailed records of all calculations

Align Incentives Where Possible

Your earnout goals might conflict with broader company strategy:

• Common conflict: They prioritize integration over growth
• Solution: Find win-win scenarios that serve both goals
• Communication: Have honest conversations about trade-offs
• Documentation: Record agreements about priorities

Manage Integration Impact

Integration activities often hurt earnout performance:

• New systems can temporarily slow operations
• Process changes can affect metrics
• Resource reallocation can impact growth
• Team disruption can hurt performance

Strategy: Push back on changes that hurt metrics, but pick battles wisely

Document Everything

Earnout disputes are common—protect yourself:

• Save all emails about earnout performance
• Keep meeting notes about metric calculations
• Document integration decisions that affect performance
• Maintain your own records of key data

Prepare for Disputes

Know your rights and be ready to defend them:

• Understand dispute resolution procedures in your agreement
• Know what constitutes breach of earnout terms
• Have legal counsel review earnout calculations
• Don't be afraid to challenge unfair adjustments