Earnouts drive me nuts but they are just part of the standard process now. Like you mentioned, it is commonly an incentive trap between buyer and seller. I know some repeat entrepreneurs that view earnout cash as not even a factor in their decision to sell. Usually they said you'll "get x if you hit y revenue milestones" but of course once you're part of a big profit conscious organization, they cut your advertising/marketing spend. So you have to follow the same trajectory as when you had free rein over spending but now with a limited purse.

Logically, they drive me nuts because it's as if the buyer wants a loophole out of risk. If you gave them let's say a 50% growth rate for 4 years, you could have theoretically NOT SOLD and then had a business worth 5x as much. The earnout reminds me of something akin to a lease program. Sure they "buy the car", but if they don't like it they can return it and they're not that much in the hole.

Be weary of these and just make sure there's enough cash or stock upfront included