Handling milestone payments

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Sometimes Buyers and Sellers agree to split a business purchase into milestone payments – for example, paying 50% upfront and 50% after 30 days, or other staged payments. Both FlippaPay and Escrow.com can accommodate milestone payment structures, but they handle them a bit differently.

Here’s how milestone payments work and how to manage them through Flippa’s secure payments options.

What are milestone payments?

In the context of Flippa transactions, milestone payments (also known as installments or staged payments) are when the total sale price is divided into two or more payments that are released at different times upon certain conditions. For instance, an APA might specify that the Buyer will pay the Seller 70% of the final transaction price on closing and 30% after a defined training period, or a sale might have an initial payment and a final payment after full asset transfer. Milestones are usually tied to specific deliverables or time frames (like “after 30 days of successful site operation, release the remaining funds”).

On Flippa, milestones need to be mutually agreed upon in your signed agreement and very clearly defined so the chosen secure payment service (either FlippaPay or Escrow.com) can enforce those terms. You want to avoid setup of support or other post-transfer requirements which are not clearly defined, enforceable, or possible for you and your resources, e.g. "lifetime support", "24/7 support", or "the same profit is assured".

Using FlippaPay for Milestones

FlippaPay is quite flexible with milestone transactions. If your Asset Purchase Agreement includes milestone payment terms, FlippaPay can facilitate them in a couple of ways:

• The Buyer and Seller can agree whether the Buyer will fund the entire amount upfront or fund each milestone separately. FlippaPay allows either approach.
  
  
  • Upfront funding: The buyer could deposit the full purchase price into the trust account at the start. Our provider, AscendantFX, will then hold those funds, and disburse them to the Seller in parts as each milestone is completed on our guidance with Buyer approval at each stage.
    
    
  • Staggered funding: Alternatively, the Buyer might initially fund only the first milestone payment. Subsequent milestone payments would be funded later, closer to when they’re due. This approach might be used for longer-term deals or earn-outs. It’s riskier for the Seller because the later payments aren’t secured from day one, and we cannot potentially pay out funds which are not already secured. Typically, if using FlippaPay in this way, it’s because both parties have a high degree of trust, or other collateral arrangements are in place.
    
    
• Releasing milestone funds: As described in Releasing funds from FlippaPay, if the transaction is set for multiple payouts, the process of the successive payments is coordinated between all parties: the buyer, seller, Flippa’s Payments Team, and, where applicable, the assigned Account Manager.
  
  
• Our Payments team gets involved in coordinating milestone releases to ensure clarity. You might get personalized emails from our Payments team outlining what needs to happen and when. This human touch helps when a deal spans multiple weeks or months.

Essentially, FlippaPay can be tailored to the terms of your APA: it supports milestone funding and releases in accordance with whatever schedule you agree to. Just make sure everything is clearly documented in the purchase agreement so Flippa knows when to authorize each payout.

Using Escrow.com for Milestones

Escrow.com also supports transactions with milestones (they sometimes call it a “milestone transaction”). However, Escrow.com’s approach requires the buyer to fully fund all milestones upfront at the start of the escrow transaction. Here’s how it works:

• Before creating an escrow transaction with our normal Start Escrow.com button, please notify your Broker or our Payments or Support team that you are interested in using milestones. Those milestone stages can then be specified in a new, manually created escrow transaction, each with a dollar amount and description. For example:
  Milestone 1: $5,000 for asset handover; Milestone 2: $5,000 after 30 days of support.
  
  
• The buyer then pays the entire $10,000 into escrow at once. Escrow.com will hold this $10,000 total.
  
  
• The transaction in Escrow.com will show two milestones. After the seller completes Milestone 1 (asset handover), the buyer will go into Escrow.com and accept Milestone 1. Escrow.com will then release the $5,000 for milestone 1 to the seller, while keeping the remaining $5,000 still in escrow.
  
  
• The transaction remains ongoing with the second milestone pending. After 30 days, if the condition for Milestone 2 is met, the buyer will accept that milestone on Escrow.com, triggering release of the remaining $5,000 to the seller, completing the transaction.
  
  
• If something goes wrong at Milestone 2 (say the buyer isn’t satisfied), the $5,000 is still safely in escrow and would only be released when resolved or per the contract (or refunded if appropriate).

With Escrow.com, because the buyer’s full funds are secured in escrow from the beginning, the Seller has security that the funds for later milestone payments is there – they don’t have to trust that the Buyer will come up with it later. The trade-off is that the Buyer has all their money tied up at once. This is why Escrow.com requires full funding upfront for milestones: it keeps control of the entire amount and can partially release from it.

Important Differences & Tips:

• In Escrow.com, milestone escrow is a formal process and good for ensuring larger staged payments are all guaranteed. It’s excellent for deals that close over a short term with clear deliverables.
• In FlippaPay, milestone funding can be more flexible (fund-as-you-go), but we typically recommend buyers fund as much as possible upfront to show commitment. If only the first milestone is funded initially, the seller is taking on risk for the later payments. Often, smaller subsequent payments might be handled outside FlippaPay if they are over a long period (see Earn-outs below).
  
  
• Escrow.com charges their escrow fee on the entire transaction, but it doesn’t multiply or increase by milestones. The FlippaPay fee (0.5%) is on the total as well, regardless of how many disbursements.
  
  
• Communication: If you’re using milestones, communication is key more than ever. The Buyer and Seller (and possibly a Broker or Flippa account manager) must be all on the same page about when each milestone is achieved and authorized. It helps to send a quick message in Flippa when a milestone is delivered, like “Milestone 2 deliverables are now provided, please review.”
  
  
• Tracking: Keep a record of each milestone’s completion. Flippa’s contract (APA) builder has sections for Milestone Payments which you can fill out, making it very clear (Legal Services and Templates - Flippa). Both parties should refer to that schedule so everyone knows the plan.
  
  

About “Earn-Outs” or Longer Schedules

Sometimes a deal involves an earn-out, which is a kind of milestone tied to future performance (e.g., the buyer will pay an extra $5,000 in 6 months if the business hits a certain revenue target). These are more complex. FlippaPay supports earn-outs in the sense that you can structure the deal that way, but FlippaPay itself typically will not hold funds for many months waiting on a performance metric. In fact, FlippaPay’s approach is usually that any subsequent monthly payments after the initial closing are handled directly between buyer and seller (off-platform). FlippaPay doesn’t support holding a domain or asset as collateral for an earn-out – once the main transaction is done, any future payments rely on the contractual obligation and trust between parties.

Escrow.com, on the other hand, has a service called Domain Name Holding and allows more extended payment schedules (monthly, quarterly, yearly up to a certain time). For instance, they can hold a domain name in escrow and release it only when all payments are done, effectively enforcing an installment plan. If your deal is more of a financing/earn-out spanning many months, Escrow.com might be a better venue, since they can manage long-term escrows and even keep an asset (like a domain) as security. However, those arrangements can be complex and may incur higher fees or special conditions.

For most Flippa users, “milestone payments in escrow” will refer to a short-term series of two or three payments tied to clear steps (like 50% now, 50% in 30 days). Both FlippaPay and Escrow.com can handle this:

• If you use FlippaPay, coordinate with Flippa to either fund all at once or per milestone. You’ll release each milestone from the Flippa platform when appropriate.
  
  
• If you use Escrow.com, let us know so we can set up the milestones in the escrow transaction and fund everything at start. Then, you can release each through Escrow.com’s interface as you go.

Always ensure the timeline and conditions for each milestone are written and clearly understood as part of your agreement. That way, if there’s any disagreement later, both parties can refer back to what was agreed. With clear milestones and good faith on both sides, milestone payments can make a transaction more flexible and even build extra trust – the buyer doesn’t have to pay 100% until they see initial results, and the seller knows additional payments are pre-funded or contractually secured.