The Deal Behind the Price: How Structure Decides What You Actually Keep

Two owners sell comparable businesses in the same year, each for the same headline number. Three years later, one has collected nearly all of it. The other is still waiting on an earnout that will never pay out, holding a note the buyer has stopped servicing, and arguing over a working capital adjustment. The difference was never the price — it was the structure underneath it.

1. Cash at close is the only certain number

Every purchase agreement divides the price into money that is certain and money that is conditional. Cash at close is certain. Everything else — earnouts, seller notes, escrows, adjustments — is a promise with conditions attached, and the conditions are written by people negotiating against you. That is not a reason to refuse contingent value; plenty of good deals carry it. It is a reason to evaluate any offer by its guaranteed component first, and to treat the rest as what it is: possible money, not payment.

2. Earnouts bridge gaps — and move risk onto you

An earnout makes part of the price contingent on the business hitting targets after closing. It has a legitimate purpose: when a seller believes in growth the buyer cannot yet verify, the earnout lets both sides price their own conviction. The trouble is that once the deal closes, the levers that determine whether targets are hit — pricing, staffing, investment, how revenue is counted — belong to the buyer. Earnouts against revenue are safer than earnouts against profit, shorter is safer than longer, and definitions matter more than percentages. A seasoned seller values an earnout at a discount, and never lets it substitute for price they could have negotiated as cash.

3. Seller notes and holdbacks: financing your own sale

A seller note means you are lending the buyer part of the purchase price, usually subordinated to their bank — which means if things go wrong, the bank is paid first and you are paid if. A modest note with real interest, a defined term, and security can be a reasonable piece of a deal, and in some transactions it is what gets a deal financed at all. A large note from a thinly capitalized buyer is not a deal term; it is the risk you were trying to sell. Holdbacks and escrows — money set aside against representations and warranties — are standard, but their size and duration are negotiated, not fixed. Both deserve the same scrutiny as the price itself.

4. The working capital peg — the quiet number

Most deals close on a cash-free, debt-free basis with a “normal” level of working capital left in the business. The definition of normal is negotiated, and it routinely moves six figures in one direction or the other on a lower-middle-market transaction. Sellers focus on the headline while the peg is being set; buyers do not. Knowing your true working capital cycle — and having clean monthly balance sheets to prove it — is worth real money at closing, not because anyone is being dishonest, but because an undefined term is always resolved in favor of the side that defined it.

5. Net proceeds are the real scoreboard

Two identical headline prices can net out hundreds of thousands of dollars apart once the structure and the tax treatment are applied. Asset sale versus stock sale, how the purchase price is allocated, what portion is paid as transition compensation, what your state takes — these are decided in the agreement, not after it. The number that matters is what lands, after tax, in your account across the full life of the deal. Any offer worth considering is worth modeling that way before you compare it to another.

The takeaway

The price is one line in an agreement that runs a hundred pages, and many of the other pages exist to move risk from the buyer to you. Compare offers on cash at close, after tax, with every contingent piece valued as a possibility rather than a payment. The headline is the output. Structure is where the deal is actually made.

Wondering what your business could be worth? Request a free, confidential market assessment from Jackim Woods & Co., or book a confidential intro conversation with Jim Bates. No pressure, no obligation — just a senior-level read on where you stand.