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The M&A Earnout Revenue Recognition Trap That Cost a Founder $900K
In this episode of The Acquisition Talk, Lucas and Luna dissect a painfully common earnout trap: when a seller's revenue recognition policy doesn't match the buyer's, the earnout metrics can vaporize before your eyes. Lucas walks through a real case of a B2B SaaS founder who recognized revenue on a cash basis while his buyer used ASC 606 — causing a $900,000 earnout shortfall. They explore how multi-year contracts, prepaid subscriptions, and deferred revenue allocations turned reported revenue into a fraction of what the seller expected. Luna pushes back on whether the seller…
The skinny
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