Deal math
Model total seller consideration across cash at close plus a 3-year earnout with SDE thresholds and targets. See scenario-by-scenario payout. Free. No signup.
Total seller consideration
$1,250,000
$1,000,000 cash + $250,000 earnout
| Yr | SDE | Ratio | Earned |
|---|---|---|---|
| 1 | $350,000 | 50% | $50,000 |
| 2 | $400,000 | 100% | $100,000 |
| 3 | $450,000 | 100% | $100,000 |
Uses a linear ramp between threshold and target. Real earnouts often have binary triggers or step functions — match the calculator output against the LOI exactly before signing.
Linear-ramp model between threshold and target. Real deals use binary triggers, stepped tiers, and cliffs — match output against the LOI exactly. Always pair with operational covenants in the purchase agreement to prevent gaming.
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Earnouts bridge a valuation gap: the seller believes the business will grow; the buyer is not willing to pay for that growth upfront. Structuring part of the price as contingent on SDE or revenue performance lets the seller realize the upside if they're right, while protecting the buyer from overpaying if growth stalls.
This tool uses a linear ramp: if the year's projected SDE is at or above the target, the full per-year tranche pays out; at or below the threshold, nothing pays out; between threshold and target, payout scales linearly. Real-world earnouts can be binary triggers, stepped tiers, or cliff-based — always match the math against the LOI or SPA exactly.
Seller-side nightmare. LOIs typically include operational covenants during the earnout period — no material changes to marketing spend, no layoffs of key staff, no pricing changes — so the seller can trust the metric is being measured cleanly. Without those covenants, a motivated buyer can game the formula.
They can. SBA 7(a) financing typically covers cash at close plus any seller note on standby. An earnout contingent on future performance is usually paid from the operating business's cash flow, not the loan, so it needs to clear DSCR even after earnout payments. Use the DSCR Calculator with the earnout tranche added to annual debt-equivalent obligations.
On ecommerce deals, earnouts range 0–30% of total consideration. Zero is most common (a simple cash-at-close deal). 10–20% is typical when there is a growth story to validate. Above 30% and you are essentially structuring a performance-based purchase, which is a different negotiation posture than a traditional acquisition.