What decides whether a sale was a good one
The headline multiple is the number founders remember. It is rarely the number that decided whether the deal worked.
Ask a founder how their sale went and you will almost always get a multiple. It is the number that gets remembered, repeated at conferences, and measured against whatever a competitor is rumoured to have achieved. It is also one of the weaker predictors of whether the deal actually worked. That is not an argument for accepting less. It is an argument for being precise about what you are measuring, early enough that the answer can still change something.
What is an earn-out in M&A, and why it decides the number
The headline multiple is the shorthand in the offer: the valuation divided by EBITDA. It is the figure on the first page, and the one most founders carry into the room as their measure of success.
The number that matters is the effective multiple. That is the total consideration actually received, divided by EBITDA at the point of sale. The two are equal only when every pound of the headline figure is paid, in full, on the terms you expected.
The gap between them is made of three things: how the deferred consideration is structured, what the earn-out is measured against, and what happens to the business after completion. Most of the disappointment in this market lives in that gap, and almost none of it is visible on the first page of the offer.
What is an earn-out payment, in practice
An earn-out is part of the price paid later, tied to how the business performs after the sale. It is a genuinely useful instrument. It bridges a gap where buyer and seller disagree about the future, and it lets a founder share in upside they believe is coming.
The difficulty is that the detail of how it is measured matters more than the headline figure attached to it. A founder who accepts a higher number, measured on metrics they no longer control, has not negotiated a better deal. They have accepted a lower certain price and taken equity-like risk on somebody else's operating decisions.
That is a trade worth making with open eyes. It is not one to make because the bigger number looked better in the letter.
What is an earn-out agreement supposed to answer
Four questions are worth far more than the number itself, and all four belong in the agreement rather than in a conversation.
What exactly is being measured, and who prepares that figure? What happens if the buyer restructures, reprices or reallocates clients? What are you entitled to see, and how often? And if the business is folded into a larger group, does the entity the earn-out depends on still meaningfully exist?
An agreement that answers those clearly is worth more than one with a higher ceiling and vague terms. We have seen both, and the second is where founders lose money they had already counted. The cost of getting this wrong is not a worse deal on paper. It is a deal that reads well at signing and pays out at a fraction of the number everyone celebrated, by which point the leverage to argue has gone.
A buyer who can make the business worth more
The second reason the highest offer is not always the best deal is that buyers are not interchangeable.
A buyer with the right platform changes what the business goes on to earn. Access to a larger sales function, a client base that buys more of what you already do, an international footprint, an operating model that removes a constraint you have worked around for years: any of these can be worth more than a few points of headline multiple, particularly when part of the price is deferred.
The inverse is equally true. A buyer who pays more and then slows the business down has bought your upside and spent it. This is why we do not begin a sale process with buyers. We begin with the shareholders, the business, and what a good outcome looks like, because that changes which buyers are worth approaching at all.
Culture is a commercial term, not a soft one
It is tempting to treat cultural fit as the part you discuss once the commercial terms are agreed. In a deal with deferred consideration it is not soft at all.
Whether your management team stays, whether they are motivated, and whether the buyer's way of operating is compatible with how your business actually wins work: those determine whether the performance the earn-out depends on is deliverable at all. A management team that leaves in year one is a commercial event, not a cultural one.
It is worth testing this before terms are agreed rather than after. How does the buyer make decisions, how quickly, and who would your people actually report to? Those answers are available for the asking during a process, and they are very expensive to discover afterwards.
“A buyer can be financially strong and culturally wrong. That combination rarely creates the best outcome.”
How to value my business to sell, before anyone makes an offer
Buyers do not price last year's profit. They price how repeatable it is. Recurring revenue, the spread of clients, and whether the business runs without you are what move the number, and they are the things you can still influence.
Multiples quoted at conferences are close to useless for this, because they carry a risk profile that is not yours. A business with one client at forty per cent of revenue and a founder in every pitch is not the same asset as one with neither, whatever the sector average says.
The useful exercise is to look at your own business the way a buyer will: what would concern them, what would they want to fix, and what would they pay less for. Most of those answers are known to you already, and most of them are fixable given twelve months.
How do I sell my business without losing the value in the process
Three things are worth doing well before an offer letter exists.
Decide what success means, in writing, before you meet a buyer. Full exit or partial. Speed or certainty. What happens to your team. Founders who have not agreed this among themselves end up negotiating against each other in the room.
Understand what makes the profit repeatable, and fix what you can while you still have time. Then judge structure and buyer together, never separately. The question is not which offer is highest. It is which combination of buyer, structure and terms is most likely to pay out in full. Read together, those three decisions matter more to the final figure than any negotiating tactic used on the day itself.
The honest version
The highest price might still be the best deal. Sometimes it is. Founders should simply not assume it automatically, and the ones who do best tend to be those who worked out early and deliberately what they were optimising for.
The best transactions are not defined by the biggest number on the first page of the offer letter. They are the ones where the right buyer, the right structure and the right strategy come together to create lasting value for shareholders and for the business they built.
That is a harder thing to summarise at a conference than a multiple. It is also the version founders tend to be glad of three years later, which is the only test of a sale that has ever meant very much.
Questions founders ask about earn-outs and sale value
What is an earn-out payment?
Part of the sale price paid after completion, tied to how the business performs. It bridges a gap on value. How it is measured matters more than the figure attached to it.
What is an earn-out agreement?
The contract setting what is measured, over what period, who prepares the figures and what the buyer may change. Those terms decide whether the money is ever paid.
What is an earn-out in M&A?
Deferred consideration used when buyer and seller disagree on future performance. Common in marketing, technology and data deals, where value sits in clients and people.
How much can I sell my business for?
It depends on profit and how repeatable that profit is: recurring revenue, spread of clients, and whether the business runs without you. Our assessment scores those in about two minutes.
How long does it take to sell a business?
Months, not weeks. Preparation is usually the longest part, then marketing and negotiation, then diligence and legals. Starting preparation early shortens everything after it.
How do I value my business to sell?
Start from sustainable EBITDA, then ask what makes it repeatable. Buyers price the repeatability, not last year's number. Headline multiples quoted elsewhere rarely share your risk profile.
If I sell my business, what tax do I pay?
Usually capital gains tax, and Business Asset Disposal Relief may reduce it, subject to conditions and a lifetime limit. Rates have changed recently, so check current HMRC guidance with your accountant.
How do I sell my business?
Prepare the numbers and the story, agree what it is worth, build a list of real buyers, approach them properly, negotiate, then work through diligence to completion.
This article develops an argument first made in the SoDA Report, the publication of the Society of Digital Agencies, in its When Change Demands Structure 2026 issue. Milestone Advisory are M&A Partner to SoDA. Read the original article.