Now that we’ve discussed some of the preliminaries of selling your healthcare staffing firm, it’s time to take 
a look at the often-used “earn out” strategy. An earn out strategy is a means by which a price to purchase a company is negotiated with
part of the payment tied to performance during some future period. This strategy typically ties the seller to the business for a prescribed period of time to assist in hitting agreed upon numbers for full payment.
What does this really mean? From the buyer’s perspective, they are, to some extent, buying an unknown. Contracts could be ready to expire or other internal issues may be lurking that could have a serious detrimental impact on the earnings of the company being bought. If part of the purchase price is
It is not uncommon for 50% to 60% of a purchase price be deferred as an earn out over three to five years. This provides some deferral of income on the part of the seller, and if negotiated correctly can provide an even greater sale price than originally established. If created poorly, the earn out provision could become a nightmare for the seller.contingent on the seller remaining in place to meet certain benchmarks this provides a level of security to the purchaser.
According to Inc. magazine, about three quarters of all mergers and acquisitions fall short of expectations published at time of deal, and about half of all deals result in a decrease in value for shareholders of the purchasing company. With those figures in mind, it’s important to negotiate an earn out that is fair, but does not tie your hands behind your back. More on that later.
