How common are earn-out clauses?

Dear Aunty B,

I am negotiating the sale of my business and expected an earn-out clause whereby I would stay on in the business and get more money if the business achieved its objectives.

However, it has not been offered. Should I suggest one and negotiate a higher price or not? How common are earn-out clauses?

Unsure what to ask,
Sydney

Dear Unsure,

Lots of business sales do not include earn-out clauses. You might not be offered an earn-out clause because the buyer does not perceive you as pivotal for the future of the business or to achieve its short-term goals. This might well offend you. After all we all believe the business would fall in a screaming heap if we did not turn up tomorrow morning. So I think it would probably be a waste of time raising the question.

And besides, most entrepreneurs I know who had to serve out earn-out clauses under new masters who usually set about ruining the company as fast as they could, would rather rub chili in their eye sockets than stay on.

Good luck!
Your Aunty B

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