In this edition of It Depends, associate Alfred Jackson explores the various ways you can get paid when selling your business.
Alfred will be presenting on this topic alongside Clinton Jackson at our Annual Adviser Conference on 26 and 27 March 2026. Register now.
Video Transcript
Hello, my name is Alfred and I’m an associate here in the commercial team at Cooper Grace Ward. And on this version of It Depends, I’ll be talking about, how do I get paid when I’m looking at selling my business?
I’ll be covering this and some related topics at the Adviser Conference on the 26th and 27th of March. Look forward to seeing you guys there.
How will I get paid – Cash in full on settlement
So, how do you get paid? It depends, as you’ll appreciate. When you’re selling your business, this is a commercial arrangement where the parties negotiate a final position.
The most common one is getting paid in cash at settlement. This is usually the preferred option by the seller. It’s simple, it’s quick, it’s easy, and there’s usually less room for dispute.
How will I get paid – Part cash, part vendor finance
So, what’s another option? Another option is, you might receive part of the cash at settlement, and part of it might be vendor or financed.
All vendor finance really means is that you agree to take some of the purchase price at a later date. And you can think of it a little bit like a loan from the seller to the buyer.
As you’d appreciate, typically a seller is going to want to receive the purchase price upfront, but this can be a good way to get the deal across the line. However, if you’re the seller, you need to make sure that you have sufficient security to protect what is, in essence, a loan to the buyer.
How will I get paid – Part cash, Earn-Out
So, another option in terms of how you get paid is you might receive part cash on settlement, and there might be what’s called an Earn Out.
Really what an Earn Out tries to achieve is that what you get paid is reflective of the business’s future performance after settlement. This is typically used where the buyer might be uncertain about whether or not the business is going to be able to continue operating to the same level, without the seller who’s departing.
Obviously, from the seller’s perspective, you might be concerned that what you get paid is tied to how the business performs after you’ve sold the business and after you’ve lost control.
It’s also an arrangement which has more disputes than the other types, because you can have certain issues such as creative accounting, bringing forward expenses, or deferring revenues.
So, if you do want to go with an Earn Out arrangement, you need to make sure that the rules of that arrangement and how the profits are calculated is agreed up front and documented appropriately.
How will I get paid – Part Scrip
And so the final way of getting paid we’ll be discussing in this version of it depends, is receiving Part Scrip. Or alternatively, you can receive Full Scrip. Receiving scrip is really just another way of saying you’re getting shares in exchange for what you’re selling.
So, you’ll typically see this type of arrangement where the expectation is the seller is staying in the business quite often, say with a private equity style arrangement.
When you are a seller, however, one of the big drawbacks is you’re receiving shares in an entity. And unless that entity is listed on a stock exchange, it might be very difficult to actually dispose of those shares. So, you might find that you’ve sold your business at what you think is an agreed value. However, you’re not actually able to realise that value into cash in an easy or effective manner.
You’ve also got the problem that you’ll commonly have to sign up to a shareholders agreement. This can make selling your shares even harder.
As I mentioned at the start, there are a number of different ways for a seller to receive value when it comes to selling their business and the four we’ve just spoken about probably four of the more common ways, but ultimately that’s not an exhaustive list.
So, if you have any questions or queries about selling your business generally, please feel free to reach out to me or any of the team here at Cooper Grace Ward and we’ll be happy to help.
