Headline price vs. what you take home: earnouts, seller notes and inventory

When an offer arrives, it's natural to look at the headline number first. But two offers with the same headline price can be worth very different amounts to you. What matters is how much you receive, when you receive it, and what has to happen for you to receive it at all.

This article explains the most common parts of a small e-commerce deal so you can compare offers on what they're really worth.

Cash at close

This is the money paid when the sale completes, usually through an escrow service once both sides have met the agreed conditions. It's the most valuable part of any offer because it's certain. Everything else in this article is money you might receive later.

When you compare offers, start by lining up the cash at close.

Earnouts

An earnout is part of the price that is only paid if the business hits agreed targets after the sale, typically revenue or profit over the following months or years.

Buyers propose earnouts when they're unsure the earnings will continue. Common reasons include recent fast growth, a new product that hasn't been proven over a full year, or heavy dependence on the owner.

What to check in an earnout

The metric. Revenue is easier to verify than profit. Profit depends on decisions the buyer makes, such as how much they spend on ads or what they charge the business for overheads.
The targets. Are they based on what the store has actually done, or on optimistic growth?
All or nothing, or sliding scale. Missing a target by 1% shouldn't cost you the whole payment.
Your control. After the sale you usually won't control pricing, marketing or inventory. Ask what commitments the buyer will make about running the business.
Reporting and disputes. How will you see the numbers, and how are disagreements resolved?

Treat an earnout as uncertain. Many sellers value it well below its full amount when comparing offers.

Seller financing

With seller financing (often called a seller note), you lend the buyer part of the purchase price, and they repay you over time with interest. It's common in small business sales, especially when the buyer is using a bank loan for the rest of the price, and it can widen the pool of buyers who can afford your store.

What to check

Interest rate and term. How long until you're fully paid, and on what schedule?
Security. What happens if the buyer stops paying? Can you take back assets, or are you behind a bank lender?
Subordination. If a bank is lending too, its loan may be repaid before yours, which increases your risk.
The buyer's track record. You are now their lender. Assess them like one.

A seller note is worth less than the same amount of cash today, but often more than an earnout, because repayment doesn't usually depend on hitting performance targets.

Inventory

Physical-product stores have stock on hand, and its treatment can move the effective price significantly.

There are two common approaches:

Inventory included. The price covers a normal level of stock, often defined as a dollar amount or a number of weeks of sales. If you hand over more or less than that, the price is adjusted.
Inventory on top. The buyer pays the agreed price for the business plus the cost of inventory on hand, counted at closing.

Clarify which one an offer uses. An offer of $400,000 including $60,000 of stock is worth $60,000 less to you than an offer of $400,000 plus stock. Agree how inventory will be counted, valued (usually at cost) and how damaged or slow-moving stock is treated.

Working capital and other adjustments

Depending on structure, the price may also be adjusted for things like customer orders already paid for but not yet shipped, outstanding supplier invoices, or gift card balances. These are usually small for a Shopify store, but they should be written down rather than left to the last week.

Transition and non-compete

Most buyers ask for a handover period, during which you train them and help with supplier introductions. Check how long it lasts, how many hours are involved, and whether extended help is paid.

Buyers also commonly ask for a non-compete agreement, preventing you from starting a competing business for a period. Make sure the scope (products, regions, length) is reasonable for your plans.

Asset sale or share sale, and tax

Many small online business sales are structured as asset sales, where the buyer purchases the store's assets (domain, brand, inventory, accounts, content) rather than the company itself. How the price is allocated across those assets can affect the tax both sides pay. In the US, for example, buyer and seller in an asset sale generally report that allocation to the IRS. This is an area where advice from a tax professional before you sign is worth paying for.

Comparing two offers

Illustrative example. You receive two offers for a store with $150,000 SDE.

Offer A: $480,000. $300,000 cash at close, $180,000 earnout over two years based on profit targets 20% above current levels. Inventory included.

Offer B: $430,000. $380,000 cash at close, $50,000 seller note over 18 months. Inventory of about $45,000 paid on top at cost.

On headline price, A looks better. In practice, B puts $425,000 in your hands at closing (cash plus inventory), with a further $50,000 due on a fixed schedule. Offer A's earnout depends on growth you won't control. Many sellers would choose B.

Getting stronger terms

The best way to get more cash at close is to reduce the buyer's uncertainty before the offer: clean books, documented operations, low owner hours, and a steady or rising trend. Buyers use earnouts and seller notes to protect themselves from risks they can't verify. The fewer of those there are, the less of your price is deferred.

Next step

Understand what's driving your price in the free estimate, and see where to sell a Shopify store for how the sale route affects the buyers and terms you'll see. The exit chapter of Raise Your Multiple covers deal terms, and course members can share an offer with the StoreWorth experts for a second opinion before accepting.

This article is general information, not legal, tax or financial advice. Have a lawyer and tax adviser review any offer before you sign.