Earnout Structure Value Calculator

Earnouts contingent on targets. This calculator values.

Max earnout amount

Target achievement probability %

Earnout term months

Discount rate %

Earnout value

$707,305

Expected payment (probability-weighted)

$825,000

Discounted to present

$707,305

How the math works

Expected = max × probability. Discounted to present at discount rate over term.

On $1.5M max earnout at 55% probability over 24 months at 8% discount: $707k discounted value. Buyer books somewhere between 50-65% of max; seller hopes for full max. Bridge negotiation with tiered structure and escrow.

How to Use

Enter max earnout amount.
Enter target achievement probability %.
Enter earnout term months.
Enter discount rate %.
Read earnout value.

Frequently Asked Questions

Earnout structures?

Occupancy-based (stabilize to 90% by month 24). NOI-based (hit $X NOI run-rate). Lease-up (specific tenant signs). Sale-of-unit (condo sellouts). Tiered: partial payment at 60% target, full at 90%. Allows deal price uplift contingent on proving the value-add.

Valuation?

Probability-weighted: max × probability × discount factor. Buyer discounts earnouts heavily (50-70% of max). Seller wants full max. Midpoint: 50-65% of max typical. Structure tied to measurable, auditable metrics to reduce disputes.

Disputes?

Common litigation: what counts toward target, how measured, good-faith operations. Tightly drafted: specific calc methodology, audit rights, no 'frustration' (buyer can't intentionally hamper). Escrow funds pending disputes (amount, timing).

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.