Deal Structure

Earnout

Extra money the seller may receive later if the business hits certain goals after closing. Why it matters: Earnouts can bridge a valuation gap, but they must define targets, measurement rules, timing, control, and dispute procedures clearly.

Related terms

Valuation

An estimate of what the business is worth. Why it matters: Valuation is a range, not a magic number, and it changes based on earnings quality, growth, risk, buyer type, deal structure, and market conditions.

Closing

The moment when the sale officially happens and ownership transfers. Why it matters: This term affects what must happen at closing, how money moves, and how final obligations are documented.

Seller

The current business owner who wants to sell the business. Why it matters: The seller is not just handing over ownership; they are also proving the business, answering diligence requests, negotiating risk allocation, and often helping with transition.

More from Deal Structure

Asset Sale Cash at Close Cash-Free Debt-Free Contingent Payment Debt-Like Items Escrow Holdback Majority Sale Membership Interest Sale Minority Rollover Minority Sale Purchase Price Adjustment

Browse all 236 terms in the knowledge bank →

Get a real advisor on your team

Looking up terms is helpful. Having a vetted advisor who explains them in the context of your specific business is better.

Plan your exit Back to knowledge bank