Real Ownership Scenarios

Scenario 4: Earn-In Ownership

Senior operator earns equity over time by hitting milestones.

Practical Explanation

Best for experienced operators with little or no capital. The buyer joins the business in a leadership role and vests into ownership over 2–5 years, with milestones tied to revenue, EBITDA, or tenure. Founder typically retains minority equity and stays as advisor.

Real-World Example

Operator joins a $3M revenue business as president, earns 20% per year for 5 years based on EBITDA targets.

Typical cash required

Often $0 up front.

Experience required

Significant — earn-in pays for performance.

Advantages

✓No capital required
✓Aligned with founder
✓Real ownership built over time

Risks

!Long timeline
!Milestone disputes
!Founder may not let go

Frequently Asked Questions

How is this documented?

Vesting schedules in the shareholders' agreement, plus a performance-milestone exhibit.

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