The Earnout Trap Every Founder Underestimates

The Earnout Trap: What This Founder Learned After Selling His Company

Eric Friedman spent 20 years bootstrapping eSkill into one of the largest skills-testing platforms online. He ran three full exit processes,  navigating retrades, ghosted buyers, rising interest rates, and mounting debt pressure from a dev-shop equity structure that suddenly changed ownership. His final sale to private equity included an earnout, and what he learned is something every founder needs to hear: earnouts rarely pay, and once you hand over control, you lose the ability to hit those targets.

In this episode, Eric breaks down how he evaluated LOIs, why he prioritized buyers who actually understood the business, and the red flags founders ignore when they're desperate to close. If you're thinking about selling your company,  or even raising capital,  this is a playbook on what to do, what to avoid, and what Eric would do differently.

👉 Watch now: YouTube link

Here’s what you’re in for:

00:00 Introduction

03:40 Choosing an Investment Bank

06:22 Running the Sale Process

15:42 Finalizing the Deal and Advice for Founders

19:59 Evaluating Potential Bosses and Partners

20:25 The Importance of Thorough Due Diligence

21:34 Transparency in Negotiations

23:22 Understanding and Negotiating Earnouts

24:47 Post-Acquisition Transition

35:39 Life After the Exit

37:21 Final Advice for Founders

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ABOUT Eric Friedman

Eric Friedman is the founder of eSkill, a global leader in online skills testing trusted by thousands of employers. After bootstrapping the company for more than 20 years, Eric navigated multiple macro cycles, a complex dev-shop equity structure, and three full M&A processes before selling to private equity in 2024.

His experience spans product development, SaaS scaling, hiring, and exit strategy, with a unique behind-the-scenes look at earnouts, LOIs, and the realities of buyer behavior.

Get in touch with Eric:

• Connect with Eric on LinkedIn

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