Earnout Structure Calculator

Earnouts bridge buyer-seller value gap — common in small business and PE deals.

Total earnout potential

Target EBITDA

Actual EBITDA

Formula

Earnout paid

$1,800,000

Achievement %

0.9%

Missed amount

$200,000

How the math works

Linear: earnout × actual/target. Stepped: full payment if achievement ≥ threshold.

$1.35M / $1.5M = 90% achievement × $2M = $1.8M earnout paid (linear).

How to Use

Enter total earnout potential.
Enter target ebitda.
Enter actual ebitda.
Enter formula.
Read earnout paid.

Frequently Asked Questions

Earnout dynamics?

Used to bridge price gap when seller projects higher than buyer underwrites. Typical structure: 10–30% of price contingent on hitting EBITDA, revenue, or KPI target over 1–3 years. Pay scaled (50–100%) based on actual vs target. Risks for seller: post-close interference, accounting changes, customer attrition. Mitigation: independent earnout administrator, clear performance definitions, quarterly reporting. M&A litigation: earnout disputes most common (~30% of deals). Seller protections: minimum payment floor, acceleration on change of control.

How does this fit small business finance?

Small business owners use this calculator alongside cash flow forecast, P&L, balance sheet, and tax projection. Pair with industry benchmark data (RMA, BizMiner, IBISWorld). Decision framework: ROI > capital cost + risk premium > minimum threshold for owner time. Single calculator output is one input — owner intuition + market knowledge + financial discipline complete the picture.

SBA financing fit?

SBA 7(a): up to $5M, working capital, equipment, real estate, business acquisition, longer terms. SBA 504: real estate + equipment, fixed rate, 10–25 years. SBA Express: up to $500k, faster. SBA Microloan: up to $50k. Owner-occupied real estate (51%+ owner use) qualifies. Personal guarantee required. SBA fees: 2–3.75% of guaranteed portion.

When is this worth pursuing?

Small business decisions weighing capex, hiring, expansion, financing should consider: ROI threshold (typically 20%+ for owner risk), payback period (under 3 years preferred), cash flow coverage, opportunity cost vs alternatives. Calculator outputs inform but don't decide — owner judgment about market, competition, and execution capacity is what makes the call.