The People Who Will Make or Break Your Earn-Out

A founder's earn-out depends on people they probably haven't reassessed yet.

When a business goes to market, the advisors build a retention list based on who they can see: the CFO, the VP of Operations, the Head of Sales. That list gets the deal closed. But most advisors are paid at close, so they optimize for closing.

The founder's earn-out gets paid after, if the targets are hit, so the founder has to optimize for operating. The advisor list misses the engineer who built the core product, the operations manager who runs the workflows the buyer needs to scale, the person three levels down who everyone relies on but no advisor can name.

Relying on the advisor list is expensive. According to SRS Acquiom, which tracks thousands of private-target deals, earn-outs pay out around 21 cents on the dollar, and over 25% of earn-outs end up contested. Personnel changes during the earn-out period are a recurring source of those disputes. (Source: https://www.srsacquiom.com/our-insights/ma-earnouts-overview/)

It's clearly in the founder's best interests to get the retention list right.

The Question Isn't Who Matters. It's Who Matters Now.

Most founders know their business cold. Ask who's critical and they can tell you without thinking.

But they're answering for the business as it runs today. The deal changes the context underneath that answer. There's a new owner with a new strategy, structure, and goals.

Someone essential today might not be essential once the buyer folds the function into their own. Someone who looked ordinary might become irreplaceable because the buyer's whole thesis leans on what they do. The founder's instinct about who matters was calibrated to a company that's about to stop existing in its current form.

Most advisors can't do the talent assessment in this new context, because it isn't a transaction question. It's an operating question, asked under a future operating model that only partly exists. The founder is the one person who knows the people well enough to reason through it. And the founder's earn-out is what makes it their problem to solve.

Accelerate the Analysis

Working through the new list is easier with someone who's spent a career understanding who holds a business together.

Before founding Pin-Point Solutions, Ulli Hildebrand was Head of HR at Mercedes-Benz USA and Benteler Automotive North America. She's spent nearly 20 years building the talent infrastructure that lets companies scale without losing the people who make them work. That's the same discipline a selling founder needs to secure their earn-out.

Ulli has built two tools to help sellers work through retention planning.

The first ranks roles by exposure. Which positions would create a single point of failure if they went vacant tomorrow? It works in titles, not names, so a founder can think structurally before it gets personal.

The second evaluates flight risk. Not the obvious signals, but the early ones. Connection and energy shift months before anyone gives notice. A founder who knows what to look for can act while there's still time.

You can explore both here: go.pin-pointtalent.net/gift-klintkendrick

Why This Lands on the Founder

Walk through the deal and ask who has a reason to do this work.

The advisors are paid at close. The retention list they build protects the fee and the timeline. They usually aren't thinking about revenue targets eighteen months out.

The buyer wants the same answers the founder does, but the buyer is working blind. They have an org chart and a data room. They don't know that the engineer holds the platform together, or that the best operator was recruited away and is only staying on a counteroffer.

That leaves one person who knows the team well enough to reason through the context shift, and who pays for it personally if it isn't done right.

A founder who does this work walks into the deal with something no one else has: a clear read on who matters under the new plan, and who's already halfway out the door. That clarity is worth more than the retention dollars it informs. It's the difference between an earn-out built on a team that's still there and one built on a team that left before the six month mark.

Where This Starts

A solid talent assessment isn't diligence theater. It's the founder figuring out, before the ground shifts, whether the team they are about to lead into a new environment is the team they think it is.

Fortunately, the work isn't complicated. It can be done in three basic steps.

• First, evaluate role exposure. Ask which positions would stall the future business if they went vacant.

• Second, evaluate flight risk on the people in those roles, using early signals.

• Finally, decide what to do with what you find.

Sophisticated founders set aside the time to think clearly about their own team, with the right questions in front of them, while there's still time to act on the answers. That lets them lead from a place of knowledge. Or they can skip the step and figure it out while the earn-out clock is already running.

The founder is the only one who can do this. And the only one whose earn-out depends on getting it right.

Ulli Hildebrand is the founder of Pin-Point Solutions and former Head of HR at Mercedes-Benz USA. She helps growth-stage companies build the talent infrastructure they need to scale. Connect with Ulli on LinkedIn: https://www.linkedin.com/in/ulrikehildebrand/

Klint Kendrick, PhD, SPHR is the founder of Master Your Merger and chairs the HR M&A Roundtable. He has led more than 150 transactions and teaches HR M&A at NYU.

P.S. For buyers reading this: the same logic runs in reverse. When key people leave after close, the cost lands on you first, in lost revenue, stalled integration, and synergies that never show up. The MYM Retention Calculator shows what that exposure looks like in dollars, backed by research from MIT Sloan, EY, PwC, and the Saratoga Institute. Run your deal here: https://masteryourmerger.com/retentioncalculator