Most owners of small to medium-sized businesses assume selling their business will be straightforward when the time comes. The reality is very different.

Many businesses fail to sell, not because the owner didn’t work hard, but because:

  • The business isn’t genuinely exit‑ready
  • The owner isn’t personally ready to exit
  • And the final valuation falls far short of expectations

When these gaps appear late in a deal, buyers often propose the same solution: The Earn‑Out

On the surface, an earn‑out sounds reasonable. Stay on for a few years, hit agreed growth targets and unlock more of the “real” valuation later.

In practice, earn‑outs usually exist for one reason: The business isn’t prepared enough to justify the price today.

So the buyer says, “Prove it.”

The Problem With Earn‑Outs

An earn‑out fundamentally changes your position:

  • You’re no longer the owner
  • You’re now working for someone else
  • You no longer control strategy, priorities, or investment decisions
  • The buyer can move the goalposts; intentionally or not

And yet, your future payout depends on hitting targets you may no longer control.

Many founders discover, too late, that what felt like a compromise actually transferred leverage away from them at exactly the wrong moment.

A Better Way to Think About It

What if we reframed exit preparation entirely?

Exit readiness is just doing the earn‑out… while you still own the business.

Think about it:

  • Professionalising the management team
  • Reducing founder dependency
  • Improving reporting, margins, and predictability
  • Building systems that scale without you

That’s exactly what an earn‑out forces, except under someone else’s control.

When you do this work before a sale, a few powerful things happen:

  • Valuation improves upfront
  • Risk for the buyer decreases
  • Earn‑outs become unnecessary, or at least optional
  • You negotiate from strength

Most importantly, you stay in control.

The Bottom Line

If you think you might sell your business one day, then exit preparation isn’t optional.

But doing it after the sale, inside an earn‑out, means:

  • Less control
  • More risk
  • And often, less money than expected

The smartest founders I’ve seen do the hardest work early. They treat exit prep as: Working the earn‑out while they still own the business. And when the right deal comes along, they don’t have to prove anything; they’ve already done the work.