Earn-Out (Practice Sale)

Definition

An earn-out is a deal structure where a portion of the purchase price for a CPA firm is paid over time, contingent on the acquired practice meeting certain revenue or client retention targets after the sale. This arrangement protects the buyer from paying full price if clients leave during the transition, while giving the seller an opportunity to earn more if the book of business holds up. Earn-outs are common in accounting firm acquisitions and can span one to three years post-closing.