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Stop Pretending "Sell and Stay" Is the Safe Play
Most founders selling a $2M to $20M business think the headline number on the page is the win. It isn't. The real money lives in the parts that come later: the earnout, the rolled equity, the so-called second bite. And later only pays if the business keeps performing after you've stopped running it the way only you knew how.
This week, Ed breaks down "the vacation tell," the pattern one acquirer noticed after buying up ten small companies and keeping the old owners on. About a year after each deal closed, those owners started taking the vacations they'd sworn for fifteen years they could never take. They weren't slacking. They'd exhaled. The weight was somebody else's now. As the buyer put it: they were cooked without telling me they were cooked.
Ed connects that to the brutal math nobody puts in front of you at closing. SRS Acquiom found that of all the earnout money that could have been paid out across a pile of recent deals, only about 21 percent actually was. One dentist hit 97 percent of her revenue targets and collected 60 percent of her earnout. Miss the line by a hair and the box stays shut, in a business you no longer control.
The trap is the cruel part: the exact engine that makes the back half of your deal pay at full power is the exact thing closing is designed to switch off. This episode is about seeing that clearly before you sign, and being honest about which version of the deal you're really walking into.
Inside this episode:
- Why the relief you feel at closing is a leading indicator your number is about to shrink
- The 21-cents-on-the-dollar reality of earnouts most advisors won't say to your face
- Why "sell, stay, and ride it out" is the riskiest plan, not the safest
- What founders actually want when they stop chasing top dollar
- The only homework that matters this week if you're 54 to 58 and quietly thinking about it
Legacy lasts longer than the wire transfer. Read the structure, not the headline.
This isn't legal or financial advice. Use your own counsel. Every deal is its own animal.
Ed Weeks Jr. is a buy-side M&A advisor and the principal of Weeks Consulting Group. Book an introductory call: https://calendly.com/ed-edweeksjr/introductory-call
View all episodes
By Ed Weeks, Jr.Most founders selling a $2M to $20M business think the headline number on the page is the win. It isn't. The real money lives in the parts that come later: the earnout, the rolled equity, the so-called second bite. And later only pays if the business keeps performing after you've stopped running it the way only you knew how.
This week, Ed breaks down "the vacation tell," the pattern one acquirer noticed after buying up ten small companies and keeping the old owners on. About a year after each deal closed, those owners started taking the vacations they'd sworn for fifteen years they could never take. They weren't slacking. They'd exhaled. The weight was somebody else's now. As the buyer put it: they were cooked without telling me they were cooked.
Ed connects that to the brutal math nobody puts in front of you at closing. SRS Acquiom found that of all the earnout money that could have been paid out across a pile of recent deals, only about 21 percent actually was. One dentist hit 97 percent of her revenue targets and collected 60 percent of her earnout. Miss the line by a hair and the box stays shut, in a business you no longer control.
The trap is the cruel part: the exact engine that makes the back half of your deal pay at full power is the exact thing closing is designed to switch off. This episode is about seeing that clearly before you sign, and being honest about which version of the deal you're really walking into.
Inside this episode:
- Why the relief you feel at closing is a leading indicator your number is about to shrink
- The 21-cents-on-the-dollar reality of earnouts most advisors won't say to your face
- Why "sell, stay, and ride it out" is the riskiest plan, not the safest
- What founders actually want when they stop chasing top dollar
- The only homework that matters this week if you're 54 to 58 and quietly thinking about it
Legacy lasts longer than the wire transfer. Read the structure, not the headline.
This isn't legal or financial advice. Use your own counsel. Every deal is its own animal.
Ed Weeks Jr. is a buy-side M&A advisor and the principal of Weeks Consulting Group. Book an introductory call: https://calendly.com/ed-edweeksjr/introductory-call