Valuing a Contractor’s Business – Buyout Option

09/13/2024|Business Valuation CPA|

How to Structure a Contractor Buyout Without Getting Burned

Most contractor buyouts don’t fail because of price.
They fail because the payment structure is wrong.

If the seller takes too much risk, they feel exposed.
If the buyer takes too much risk, the deal collapses under pressure.

A well-structured agreement aligns both sides.

Here’s a structure I’ve used that does exactly that.

The Core Idea (Simple Version)

  • 20% down payment at closing
  • Fixed payments over 5 years
  • Earn-out tied to actual EBITDA performance
  • Gradual ownership transfer
  • Security is built into the deal