Once you and the owner agree to a key employee buyout, the deal moves through a clear sequence: a professional valuation, an SBA financing package, a letter of intent, the purchase agreement, and closing. From the point the owner is ready to move, this usually takes three to six months, because you already know the business. Here is what each stage involves after you say yes.
Valuation sets the foundation
Everything starts with a defensible number. If the deal is SBA financed, the lender hires an independent third party to value the firm, much like a mortgage appraisal. That valuation is built on historical cash flow, not projections, and it sets both what you will pay and what the bank will lend. It also protects you from overpaying.
Financing gets packaged
Next the SBA loan is assembled and submitted. This is where preparation pays off. A well-documented package with clean financials and a clear buyer story moves faster through underwriting. One loan covers the purchase price, goodwill, working capital, and closing costs, and the equity injection is typically 5 percent from you and 5 percent from the seller on standby.
The letter of intent and purchase agreement
A letter of intent outlines the deal terms before anything binding is drafted, price, structure, and the owner's transition role. Once both sides align, attorneys formalize the purchase agreement, which the financing bank also reviews. This is the stage where the details of your ownership, such as how multiple buyers split shares and control, get settled.
Closing and getting the keys
At closing the documents are signed, the bank funds the balance, and the seller receives 95 to 100 percent of their proceeds in cash. You are now the owner. This is the moment the Step-Up Legacy Plan is built to reach, a clean handoff financed by a bank rather than by the seller.
The transition year
Ownership rarely means the previous owner vanishes overnight. Most deals include a transition period, often about a year, with the seller's hours stepping down over time until they are only on call. They teach you the parts of the business you did not touch as an employee, such as insurance, budgeting, and lender relationships. Clients see continuity, which protects the value you just bought.
Where to go deeper
If you are earlier in the process and weighing whether to pursue a buyout at all, start with how employees buy the business they work for and how owners sell to key employees. Saying yes is the beginning, and the path after it is well worn.