TradeExit Guide

Earn-out calculator

An earn-out is worth its expected payout discounted for time and risk - usually well below its headline amount. Enter the cash at closing, the maximum earn-out, your realistic odds and timing to see what the whole offer is worth today.

Updated 2026-09-23 · 1 source · By the TradeExit Guide team

Earn-out calculator

What an earn-out is really worth to you: probability-weighted and discounted to today, versus cash at closing.

Educational estimate. Probabilities and the discount rate are your assumptions; earn-out definitions (revenue vs EBITDA, accounting control, acceleration on sale) matter as much as the numbers.

Earn-out terms that decide whether you get paid

TermSeller-friendly version
MetricRevenue or gross profit (harder for a buyer to manage down than EBITDA)
MeasurementYour historical accounting policies, stated in the agreement
Operating covenantsBuyer must run the business in the ordinary course and fund it
Partial paymentSliding scale instead of all-or-nothing
AccelerationFull payout if the buyer sells the business or fires you without cause
Information rightsMonthly reporting and audit rights

Buyers using SBA 7(a) loans for a change of ownership cannot use earn-outs, so earn-outs mostly appear in deals with PE-backed or strategic buyers. See earn-outs explained.

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Frequently asked questions

How are earn-outs valued?

Multiply the payout by your realistic probability of hitting the targets, add expected partial payouts, then discount for the years until payment at a rate that reflects the risk.

Are earn-outs allowed with SBA loans?

Not in SBA 7(a) change-of-ownership loans under the current SOP.

Sources

  1. LRM Lender Consultants - SBA change of ownership under SOP 50 10 8.1 (accessed 2026-09-23)
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