Software SaaS with owner earn-out LOI template?

September 25, 2020

by a searcher from Case Western Reserve University in Austin, TX, USA

Found a SaaS business of interest and wondered if anyone has a LOI template they really like?

This would most likely be a deal with an owner earn-out of 20-30% over###-###-#### months.

Any guidance appreciated.

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Reply by a searcher
from Case Western Reserve University in Austin, TX, USA

Thanks for the thoughts Einar. In your experience, have you witnessed seller finance properly incentivize the seller for an extended and proper hand-off of the business? In my initial observations, the current owner is more entwined in the business than he realizes. I feel he would want the new owner to succeed, but he's selling to have more time with his family and some times when owners get on the other side with most of their money....

Reply by an intermediary
from Cornell University in Santa Cruz, CA, USA

I don't have a template, but usually the seller friendly ones (and actually much simpler than anything else) are ones that are purely revenue based. I usually advise sellers to push back against any earnout that mentions profit margin or similar (too easy for you to manipulate :). If you want to be really seller friendly, don't add a cliff, just have it be a pro-rated with a cap perhaps.

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