Seller compensation after close

July 25, 2024
by a searcher from Miami University of Ohio in Cleveland, OH, USA
I am nearing a signed LOI and one of the concerns is what the sellers will be paid during the transition period. How have other people handled this?
from University of Maryland at College Park in Havre De Grace, MD 21078, USA
from Washington University in St. Louis in Chicago, IL, USA
Then based on the preferences of the parties decide if it will be an hourly or fixed fee arrangement. Fixed fee gives visibility into amounts for each party, but could result in either the buyer paying more than necessary or the seller spending more hours than assumed because there is no disincentive to do so. An hourly arrangement encourages the buyer to be judicious in how many hours they ask of the seller, but it may lead to using them too little.
finally, we agree on the rate We often start with sellers current salary as a starting point (converted to hourly or percent), and then do a gut check on the amount. Again, you want it high enough that the buyer doesn’t see it as cheap labor and over use, but not so high that they won’t use the time the need for a successful transition.
Hope that is helpful - good luck!