While this Wall Street Journal article describes the increasing use of escrows and earnouts in the sale of high-tech start-ups, the same is true of the sale of non-venture-backed companies. The author states, “Overall, two thirds of private companies that are acquired now go through post-closing purchase price adjustments.”
When planning the exit from your business, this must be taken into account. When calculating the value of all applicable exit options, there may be significant adjustments in the money the owner gets to fund his post-exit lifestyle.
In addition to taking this into account in your exit planning – you are planning your exit, rather than letting it happen to you, right? – you can also take steps to strengthen the business to make these kinds of post-closing adjustments less likely. B2B CFO® exit planners can help you recognize and take these steps!