Your next key hire could be the very person who buys your firm. By cultivating internal successors and leveraging SBA 7(a) financing, A/E/LS owners can receive near 100% cash at closing while preserving the company’s culture and client relationships.
Unlike costly ESOPs or uncertain third-party sales — where only about 20% of listed businesses sell — the Step-Up Legacy Plan™ offers a streamlined, bank-friendly exit designed for $1M to $8M A/E/LS firms.
Starting your 5 to 7 year succession roadmap now empowers trusted employees to become owners with as little as 5%-10% down payment financing, protecting your legacy and retirement security.
Your next hire can become your buyer—preserving legacy while you get paid 100% at closing.
Succession in architecture, engineering, and land surveying firms demands a realistic, bankable strategy aligned with current SBA 7(a) financing rules and industry valuations. The Step-Up Legacy Plan™ merges leadership development, financial transparency, and deal structuring to maximize your liquidity and legacy preservation.
Step 1: Identify & Groom Leadership Early (Years 1–2)
Start by selecting key employees who demonstrate technical expertise, client rapport, and business acumen. Provide mentoring and opportunities to prepare them for ownership roles.Clean, detailed financials that include backlog, work-in-progress (WIP), and client contract retention metrics are critical at this stage, as SBA lenders rely heavily on transparency and recurring revenue estimates.
Step 2: Formalize Client Contracts and Mitigate Risk (Years 2–3)
Enforceable client contracts and retention guarantees strengthen lender confidence. Data from ACEC and Project Equity show that firms with strong client backing enjoy higher valuation multiples and smoother SBA loan approval. SBA’s SOP 50 10 8 guidelines emphasize stable cash flow and conservative debt capacity, so risk mitigation here is vital.
Step 3: Early SBA-Approved Lender Engagement (Years 4–6)
Proactively involve lenders experienced with A/E/LS acquisitions. SBA 7(a) offers up to 90% financing, with buyers typically providing about 10% down; some deals use only 5% down plus a 5% standby seller note. This structure enables the seller to receive full or near-full cash at closing without extended seller financing or personal guarantees.
Step 4: Firm Valuation and Deal Structuring
Understand valuation drivers such as EBITDA margins, owner-dependency reduction, and contract strength. Work with advisers who know A/E/LS firm nuances and SBA underwriting to construct earnouts or holdbacks that address transition risk without requiring prolonged seller notes.
Step 5: Execute Exit & Transition Plan (Years 5–7)
Coordinate loan approvals, due diligence, and closing with your buyer, lender, and counsel. Your seller payout arrives largely as cash at closing. Buyers step into ownership roles supported by SBA-backed financing, preserving your firm's independence and employee engagement.
The process balances incentives and builds on SBA’s newest policies, encouraging well-prepared employee buyers and reducing seller exposure.
Early leadership grooming combined with SBA financing unlocks a legacy-preserving exit that pays you fully at closing.
Why is this approach ideal for A/E/LS firms?
This disciplined roadmap effectively avoids costly ESOP pitfalls, provides secure liquidity upfront, and maintains the culture and independence so vital to your firm’s long-term success.
For example, Phasor Corp successfully used the Step-Up Legacy Plan™ with 90% SBA financing and a 10% standby seller note, enabling immediate full cash payout to the seller and preserving staff and client continuity during a smooth advisory transition.
Ready to turn your next hire into your buyer? Begin early, prioritize financial and leadership preparation, and engage SBA-approved lenders familiar with your market niche. Allen Business Advisors offers the specialized M&A banking expertise to guide you every step of the way.
Your A/E/LS firm’s future is valuable, and your legacy deserves protection through a well-structured succession plan. With the Step-Up Legacy Plan™, you can exit on your terms, receive cash at closing, and empower your employees to lead.
Planning 5 to 7 years ahead maximizes your firm’s value and financing options, reducing risk and ensuring continuity. Reach out to Allen Business Advisors to explore how this proven strategy can work for your unique firm and situation.
Secure your legacy while unlocking full payment—your succession journey starts now.
