Can an earn-out be based on something other than revenue, like customer retention?

Yes. An earn-out can be tied to essentially any metric the buyer and seller agree genuinely reflects the business's post-closing success, and revenue is just the most familiar choice, not the only one legally available. Earnings before interest, taxes, depreciation, and amortization, gross margin, customer or client retention rates, completion of specific milestones, or even regulatory approvals are all used in practice depending on what actually matters most for the particular business being sold.

What matters more than which metric is chosen is how clearly and objectively it is defined, since a vague or subjective metric is a far more common source of later disputes than the metric type itself. A clean, auditable figure like revenue or a precisely defined retention percentage, calculated using a stated, consistent methodology, tends to produce fewer arguments after closing than a metric that depends on judgment calls or figures that are easy to characterize differently. Both sides benefit from spending real negotiating time on the definition and calculation method, not just on picking the headline metric.