Earnout scenario calculator
An earnout pays part of a purchase price later if the business hits agreed targets. Its expected value is the sum of each scenario's payout times its probability, and its present value discounts that payout for the delay and risk.
Deal terms
Scenarios
Enter the upfront price, maximum earnout and at least one scenario probability.
Inputs
- Upfront price
- Paid at closing.
- Maximum earnout
- The most that can be paid later.
- Years until payment
- When the earnout is paid.
- Discount rate
- Reflects delay and risk.
- Three scenarios
- For each: probability and the share of the maximum earnout achieved.
Outputs
- Expected earnout
- Probability-weighted payout.
- Expected total consideration
- Upfront + expected earnout.
- Present value
- Upfront + discounted expected earnout.
- Scenario table
- Total and present value under each outcome.
How it is calculated
Expected earnout = Σ probability × achievement × maximum earnout
PV = upfront + expected earnout ÷ (1 + r)years
Worked example (illustrative)
Illustrative only: $1,000 upfront, a $500 maximum earnout, 50% chance of nothing and 50% chance of the full amount, paid in one year at 10%. Expected earnout $250, expected total $1,250, present value about $1,227.
Assumptions and limitations
- Probabilities are your judgment and should total 100%.
- Assumes a single payment date.
- Real earnouts have tiers, caps, catch-ups and disputes over definitions; read the agreement.
- Not legal or tax advice.
Questions and answers
Why use an earnout?
To bridge a gap between what the seller expects and what the buyer will pay today.
What metrics are earnouts based on?
Usually revenue, gross profit or EBITDA over one to three years.
Why discount the earnout?
It is paid later and may not be paid at all.
What do sellers negotiate?
Clear metric definitions, operating covenants and information rights.
Sources
Content reviewed October 9, 2026 by the SourceX Partnerships Team. Results are calculated in your browser; nothing you type is stored.