When selling your business, one of the first surprises many owners encounter is that the purchase price is rarely paid in full on day one. Instead, part of the deal is often structured as deferred consideration, money that is due to you after the sale has completed.

This is perfectly normal and, in fact, very common in SME transactions. Buyers want reassurance that the business will perform as expected once the owner has stepped back. Deferred consideration helps bridge the gap between seller expectations and buyer comfort.

But not all deferred consideration is created equal. Broadly, there are two types you need to understand: conditional and non-conditional.

Conditional Deferred Consideration

Conditional deferred consideration is linked to performance. In practice, this means you only receive the additional payment if certain targets are achieved after the sale.

A typical example might be:

• If sales reach £2m in the first 12 months post-completion,
• Then an additional £250,000 is released to the seller.

This is often referred to as an earn-out.

The logic is simple: the buyer wants to ensure that the business performs at the level you’ve promised, and you, as the seller, share in the upside if it does.

Advantages:

• Potentially increases your overall headline price.
• Keeps you incentivised if you remain in the business during the handover.

Risks:

• If the targets are unrealistic, you may never see the money.
• You may have less control post-sale, making it harder to influence the outcome.

The golden rule is that conditions should be realistic, measurable, and achievable. Otherwise, the deferred element risks becoming worthless. This is why negotiation at this stage is so critical.

Non-Conditional Deferred Consideration

Non-conditional deferred consideration is much simpler. It is not linked to performance targets but rather to time and continuity.

For example, you might agree to stay with the business for 6–12 months after completion, ensuring a smooth handover. Once that period has passed, the buyer releases the remaining payment.

Advantages:

• Certainty – you know the money will be paid as long as you meet the time commitment.
• Simpler to agree and less open to interpretation than performance-based targets.

Risks:

• You remain tied to the business for longer than you might wish.
• It delays when you receive the full value of your sale.

For many business owners, non-conditional deferred consideration feels fairer. It recognises that the buyer is buying not just a company but also your experience, knowledge, and relationships, and that continuity has real value.

Why This Matters

Understanding these structures is vital because they directly affect both the headline price and the real value you actually receive. A deal that looks attractive on paper may not deliver if the deferred element is heavily weighted towards ambitious conditional targets.

It’s also important to be realistic: very few buyers are comfortable with a seller walking away on day one. Even if your management team is strong, buyers want the reassurance of a smooth transition. That’s why some form of deferred consideration,  whether conditional or non-conditional,  is the norm.

The Role of Your Advisor

This is where the right advisor makes a real difference. Your advisor should:

• Help you negotiate conditions that are achievable and fair.
• Ensure the structure of the deal protects your interests.
• Balance the buyer’s need for comfort with your need for certainty.

Ultimately, deferred consideration should never feel like a trap. When structured correctly, it can be a useful tool to close the gap between what you believe your business is worth and what a buyer is willing to pay upfront.

At Barnsgate Solutions, we specialise in helping SME owners navigate these negotiations. Our role is to secure the best possible deal for you,  not just the headline figure, but the structure, achievability, and timing of payments that turn a deal into a success.