As-earned structures — when the whole price is contingent.

Most deal structures put some cash on the table at close; an as-earned deal puts none. The seller is paid only as the book collects, for years, with no guaranteed minimum — which makes it the most seller-adverse structure in the toolkit and the one reserved for situations where there's no better option. It's worth understanding precisely, because using it outside its narrow lane is a mistake, and papering it carelessly can cost the seller a fifth of the proceeds in tax.

§ 01 · How it worksThe all-contingent structure.

An as-earned deal pays the seller a 30–50% share of collected commissions, monthly or quarterly, over a 24- or 36-month term — with no floor, no cap, and no KPI trigger. Payment is purely a function of cash actually collected on the acquired book; there's $0 to nominal cash at close (a dollar or a small good-faith deposit), and the full consideration is the deferred cash-flow share. That's the structural difference from an earnout: an earnout covers 20–30% of the consideration with the rest paid in cash and notes, while an as-earned structure covers 100% of the consideration. It's most often used on sub-$500K books — distressed and fold-in territory — because mainstream hybrids use earnouts instead. The instrument it most resembles, the earnout, is treated in structuring the earnout.

§ 02 · Three narrow use casesWhen it's the right tool.

As-earned fits three narrow cases and no others. A distressed agency — where the book's risk is too high for the buyer to guarantee any cash, so the only deal possible is one where the buyer pays only if the book delivers. A sub-$150K-revenue fold-in — too small to justify the legal and tax complexity of a hybrid, where a simple commission split is proportionate. And an unmanaged succession — a death, disability, or emergency exit where there was no time to structure a proper sale, and an as-earned deal is the fastest way to get the book into competent hands. Outside these three, an as-earned structure is the wrong tool, because it transfers nearly all the risk to a seller who, in a normal deal, would have the leverage to demand cash and a note. Recognizing when you're genuinely in one of these three situations — and when you're just trying to avoid funding a deal you should fund properly — is the first discipline. The fuller deferred toolkit for normal deals is in payments over time.

§ 03 · The tax-rate cliffA 20-point swing.

The sharpest risk in an as-earned deal isn't the contingency — it's the tax characterization, where careless paper can cost the seller more than 20 percentage points. A properly papered capital-asset installment sale lands at roughly 20% federal plus state plus the investment-income surtax. A commission-split or consulting recharacterization — where the payments look like the seller earning income for ongoing work — lands at up to 37% federal plus self-employment tax plus state. Same cash flow, two completely different after-tax results. The defense is architectural: structure it as an installment sale, define the purchase-price mechanism explicitly ("X% of collected commissions for N months"), structure it as an asset sale (client list, expirations, the book), keep all services-for-pay language out of the documents, and file the annual installment-sale reporting. A seller signing an as-earned deal without specialized tax counsel is the one most likely to fall off the cliff — which is itself a reason a buyer should encourage the seller to get advised, because a tax dispute later can unwind the deal. This is educational, not tax advice; the actual characterization belongs to the seller's counsel. The legal-architecture counterpart to these terms is in drafting the earnout.

§ 04 · The control paradoxWhat the seller has to accept.

The deepest tension in an as-earned deal is the control paradox: the seller's entire consideration depends on retention, yet every operational lever that drives retention — service quality, staffing, carrier relationships, responsiveness — transfers to the buyer at closing. The seller has bet 100% of their proceeds on an outcome they no longer control, which is precisely why the structure is reserved for situations where the seller has no better option. For the buyer, the paradox is the reason to use the structure honestly: take an as-earned deal only when you genuinely intend to service the book well, because a buyer who lets a distressed book decay is, in effect, paying nothing for a book they then ruin — a bad outcome for the seller and a reputational cost for the buyer. Used in its narrow lane, papered as a capital-asset installment sale, and serviced in good faith, an as-earned structure rescues a deal that couldn't happen any other way. Used outside that lane, it's a way of acquiring a book without committing capital — which is rarely the deal you actually want. How as-earned fits against the full structure menu is in hybrid deal structures.

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