Building transferable value today unlocks legacy and financial security tomorrow with a bankable, employee-owned exit.

Exit planning for architecture, engineering, and land surveying (A/E/LS) firms in 2025 demands a disciplined 5 to 7 year approach that addresses value-building, protection, tax planning, and financing strategy—aligned with updated SBA 7(a) loan programs and deal structures.

1. Building Transferable Value

Beyond revenue and EBITDA multiples, buyers and lenders increasingly focus on tangible and intangible assets that reduce transition risk:

• Market Focus: Pursue higher-value projects supported by infrastructure investments and AI-enhanced delivery to build a defensible niche.
• Leadership Depth: Identify and mentor senior employees who can seamlessly assume ownership roles, ensuring operational continuity and reducing buyer risk.
• Financial Discipline: Develop transparent, detailed financials capturing project backlog, work-in-progress (WIP), and enforceable client contracts or retainers.
• Digital & Remote Delivery: Adopt cloud collaboration, digital project management, and AI tools to streamline workflows and enhance cross-team communication despite physical distances.
• Knowledge Capture: Systematize institutional know-how with digital SOPs and training programs to reduce owner dependency and appeal to SBA lenders.

2. Protecting Value

Risk mitigation preserves buyer confidence and valuation multiples:

• Intellectual Property & Contracts: Protect proprietary methodologies, designs, and client agreements with enforceable contracts and clear IP ownership.
• Non-Competes & Employee Retention: Formalize key employee agreements and retention plans—coupled with stay bonuses funded through corporate-owned life insurance policies—to secure your management and client base.
• Cybersecurity & Vendor Risks: Conduct cyber diligence and consolidate vendor relationships to minimize operational disruption and buyer concerns.

3. Minimizing Income Taxes & Structuring Deals

Recent tax provisions for 2025 impose a top federal capital gains rate of 20%, plus 3.8% Net Investment Income Tax on high earners. Strategic planning is essential to manage this load while optimizing deal structure:

• Favor transaction structures that deliver cash at closing, reducing seller risk and accelerating retirement funding.
• Leverage the Step-Up Legacy Plan™ to eliminate seller financing and lengthy earnouts common in traditional deals and ESOPs.
• Incorporate modern deal features like minority rollover equity or contingent earnouts aligned to performance to enhance buyer feasibility without diluting seller proceeds upfront.

4. Navigating the Buyer and Financing Landscape

Internal employee buyouts remain the preferred succession path for many A/E/LS firms, supported strongly by SBA 7(a) loans. Key trends for 2025 include:

• Modest down payment requirements (~10%) coupled with loan caps up to $5 million, despite interest rates rising to 10.25%–13.75%.
• Stricter SBA eligibility and underwriting standards, emphasizing transparent financials, client contracts, and leadership readiness.
• Increased private equity interest in the sector, raising the stakes for legacy preservation and competitive positioning.
• Reduced SBA guarantee fees and longer amortizations supporting manageable buyer debt service.

Early bank engagement with SBA-approved lenders experienced in A/E/LS deals is critical for pre-qualifying employee buyers and structuring bankable financing that eliminates seller notes and personal guarantees.

Compared to costly ESOPs—often requiring six-figure setup fees plus ongoing trustee expenses—the Step-Up Legacy Plan™ offers a more streamlined, cost-effective, and legacy-aligned alternative ideally suited for firms between $1 million and $8 million in revenue.

In this dynamic market, disciplined preparation combining leadership grooming, digital knowledge management, client contract formalization, and strategic financing unlocks significant value and mitigates transaction risks.