When a buyer offers you millions to sell your company, your first instinct might be to grab the cash and walk away. But there’s a powerful move founders often overlook that could be worth even more long-term: rolling over some of your equity into the new company.

In this post, I’ll break down what rollover equity is, when it makes sense, why buyers want it, and what risks you need to watch for. If you're thinking about selling your business — or advising someone who is — this guide is for you.

What Is Rollover Equity in a Business Sale?

Rollover equity happens when a seller keeps a piece of ownership in the new entity after a transaction, instead of taking all cash at closing.

Let’s say you sell your company for $10 million and agree to roll over 15% into the new venture. That means you’re taking $8.5 million in cash and keeping $1.5 million as equity in “NewCo” — the buyer's post-transaction company.

Why do this? Because it can be a multiplier.

“It’s an opportunity to receive more than the $1.5 million of cash at close,” I explained in the episode. “Because you think the company’s got additional growth and revenue capacity.”

When you're part of a bigger company with more scale, higher margins, and stronger performance, your smaller equity slice can be worth more later than it was at the time of sale.

Why Smart Founders Consider Rolling Over Shares

There are two big reasons why this move often pays off:

1. You Believe in the Upside of the Combined Company

If you’re selling into a platform that’s growing fast, you may get access to a higher multiple than you could earn on your own.

“Let’s just say maybe you got a multiple of 7x EBITDA on your company. The combined company may be valued at 13x,” I said.

So your $1.5 million in rollover equity isn’t locked at your old valuation. It may rise substantially as the larger business scales.

2. The Buyer Wants You Aligned

Buyers like rollover equity because it keeps the seller mentally — and financially — engaged.

“It generates alignment,” I said. “And it’s very common if an entrepreneur is going to continue in the business in some form.”

They want your help to hit aggressive targets, and keeping some skin in the game helps drive that forward.

The Tradeoff: You Lose Control

This is where founders often trip up.

“The one thing to contemplate with rollover equity is — you don’t have control.”

Once you sell, that 15% stake isn’t yours to run. You’re a minority owner now. The new company makes the big decisions. That means you have to be comfortable with who you’re getting in business with again.

And this is the piece many miss: if you're not aligned with the new leadership's vision or strategy, your equity could stagnate or even disappear.

So before agreeing to a rollover, ask:

• What’s the buyer’s track record post-acquisition?

• Who’s on the leadership team?

• What’s their exit strategy — and how soon?

Rollover Equity Example: A Simple Math Breakdown

Let’s go back to our example:

• You sell for $10 million

• You roll over 15% ($1.5 million)

• Your original company got a 7x multiple

• The combined company is now valued at 13x

If the larger company exits later at 13x, your stake could be worth:
$1.5M x (13 / 7) = approx. $2.8 million

That’s almost double what you would have taken at close.

And if that new exit happens in just 2–3 years? That’s a serious return — even better than most private equity funds.

Key Questions to Ask Before Accepting a Rollover Offer

Before signing anything, get clarity on these:

1. What percentage are you rolling over — and what does it buy you?

2. How will the new company be structured? Will there be preferred shares above yours?

3. What’s the timeline for a second exit or liquidity event?

4. Do you have any governance rights or protections?

5. What happens if the buyer raises more capital later and dilutes equity?

Don’t just focus on the upside. Know the rules of the game before you re-enter the field.

Bottom Line: Keep Some Skin in the Game, But Know the Risks

Rolling over equity isn’t just about betting on the future — it’s about betting on the right team.

If you believe in what the buyer is building and want to participate in that next level of value, a rollover can be a smart move. But don’t be blinded by the potential upside. Understand the structure. Get good counsel. And ask the hard questions before you sign.

“You’re not in control anymore. That’s the key thing I want you to hear,” I said. “But if you’re aligned with the new team, and you believe in what they’re doing, this could be a really smart part of your strategy.”

Quick Recap: When to Consider Rollover Equity

• You believe the larger company has stronger growth potential

• You trust the new leadership and want to stay involved

• You want to multiply your exit value over time

• But — you need to be okay with losing control

• And — you must understand the risks and protections involved

Conclusion: Think Like a Buyer, Act Like an Owner

When you sell your business, the goal isn’t just a payday — it’s maximizing the return on everything you built.

Rolling over shares can extend that payoff, but it comes with new rules. If you're thinking about selling, make sure you think like a buyer, too. That shift in perspective is what separates a good deal from a great one.