How much is cash at closing and how much do I wait for?

Earnout vs seller financing is one of the first real questions in any offer, because the price on page one of a letter of intent is not the money in your account on closing day. The NRCA lists the questions owners should ask before succession planning: how much is cash at closing, how much is contingent, what your role is afterward, and what taxes hit when. This guide answers the first two, piece by piece, then walks through one made-up deal so you can see how a headline price shrinks to a day-one number.

One HVAC owner put it plainly on a forum: offered about $1.3M, he expected to net about $700K after debt and tax. That gap is normal. What matters is knowing it before you sign.

The pieces of a price

Most offers to trade companies mix some of these:

Real deals show the mix. Kingsway, a public company, bought plumbers in 2025 with 71% to 86% of the price in cash at close and the rest in seller notes and earnouts, as reported by Salt Creek Advisory. By our arithmetic on the disclosed figures, one of those deals works out to about 6.25x adjusted EBITDA, up to 7.5x if the earnout is paid. Leap Partners says its offers can include money up front and substantial earnouts.

Earnout vs seller financing

Both mean you wait. They are not the same kind of wait.

Seller notes. You lend part of the price back to the buyer, who pays it with interest over a few years. A note is a promise to pay, not a guess. Ask what secures it, whether the buyer signs personally, and what happens if a payment is missed. If the buyer uses an SBA loan, your note may need to be on full standby for the life of the loan to count toward the buyer's 10% equity injection. Standby can mean no payments to you for years. Ask the lender in writing.

Earnouts. You get extra money if the business hits revenue or profit targets after closing, usually over one to three years. Earnouts bridge a gap when you think the company is worth more than the buyer will pay today. They also pay out less than owners hope. Where an earnout paid anything at all, the median payout was 43 cents on the dollar (SRS Acquiom data, via Salt Creek Advisory). Plan your retirement on the cash, and treat an earnout as a bonus.

If you must accept an earnout, push for targets you can see and check (revenue is harder to move than profit), monthly reports, a say in decisions that affect the target, and what happens if the buyer merges or sells your company before the period ends.

Rollover equity

Some PE buyers ask you to keep a slice, often by rolling part of your price into shares of their group. Redwood says owners retain equity, and Salt Creek reports PE prices are usually part cash and part rollover. If the group sells later at a higher price, your slice can be worth more than it was. If it struggles, it can be worth less. You usually can't sell it when you want, and you have little say. Count it as maybe, not money.

Escrow and holdbacks

The buyer keeps part of the cash in a separate account, or simply holds it back, to cover claims that come up after closing: an old job that goes bad, a tax bill, a promise in the purchase agreement that turns out wrong. If nothing comes up, it is released after the agreed time. Ask how big it is, how long it lasts, and what counts as a claim.

Working capital

Most buyers price the company "cash free, debt free, with a normal level of working capital". That means you keep the cash and pay off the debt, but you leave enough receivables, inventory and deposits for the business to keep running. The agreed level is called the peg. If you deliver less than the peg on closing day, your price goes down by the gap. If you deliver more, it goes up. Agree how the peg is worked out before you sign the letter of intent, not after.

Try your own offer here. The calculator needs no email.

Common mistakes

• Comparing two offers by headline price. A $2.2M offer with 90% cash can beat a $2.6M offer with half in an earnout.
• Counting the earnout as retirement money. Plan on the cash and the note. Treat the earnout as upside.
• An unsecured seller note. Ask for security and a personal guarantee.
• Leaving the working capital peg vague in the LOI. It is one of the most common closing-day surprises.
• Agreeing earnout targets based on profit the buyer controls. New overhead can wipe out a profit target.

Questions to ask your CPA, attorney or broker

1. Of the headline price, how much is cash at closing, and how much after debt, fees and escrow?
2. What secures my seller note, and what happens if the buyer misses a payment?
3. If the buyer uses an SBA loan, does my note have to be on standby, and for how long?
4. How exactly are earnout targets measured, and what happens if the company is merged or sold?
5. How is the working capital peg calculated, and what does it include?
6. How big is the escrow, how long does it last, and what counts as a claim?
7. When is each piece taxed, and at what kind of rate?

Sources

1. NRCA, Questions company owners should ask before succession planning begins
2. Reddit r/ProHVACR, Should I sell the business?
3. Salt Creek Advisory, Who Buys Plumbing Companies in 2026
4. Nasdaq, Kingsway Announces Acquisition of Southside Plumbing
5. Leap Partners, Our Process
6. CapBench, SBA SOP 50 10 8 rule changes 2025 to 2026
7. Redwood Services, home page
8. Chisel Industries, How to sell a roofing business
9. Axial, Roofing M&A Activity and Market Trends
10. Chisel Industries, How to sell a plumbing business
11. Texas State Board of Plumbing Examiners, Responsible Master Plumber