Your trusted employees already understand your firm’s culture, clients, and projects intimately. With evolving 2024-2025 SBA financing programs and modern succession strategies, you can enable a smooth ownership transition while receiving near 100% cash at closing.
This article presents an actionable 5 to 7 year due diligence roadmap for architecture, engineering, and land surveying firms to prepare leadership, financial transparency, and bank-approved financing. We refresh essential elements including SBA loan updates, valuation multiples, legal and cyber diligence, and ESOP alternatives like the Step-Up Legacy Plan™—all designed to protect your legacy and liquidity.
Disciplined due diligence and early bank partnership unlock near 100% cash at closing while preserving your firm's unique legacy.
For A/E/LS firm owners planning to exit within 5 to 7 years, structured pre-sale due diligence is critical to maximize value, secure favorable SBA-backed buyer financing, and preserve firm culture.
Year 1–2: Leadership Development & Financial Transparency
Identify senior employees ready to step into ownership roles and mentor them accordingly. Parallelly, clean and rigorously document financials including backlog, work-in-progress (WIP), detailed project revenues, and client contract retainer agreements. Transparent financials are vital to SBA lenders and drive higher valuation multiples—currently averaging 4x to 7x EBITDA depending on local and niche markets.
Year 2–3: Formalize Client Contracts & Mitigate Risks
Secure enforceable client retention contracts, guarantees, and recurring revenue commitments. These reduce perceived lender risk and strengthen employee buyers’ loan eligibility. SBA 7(a) lenders increasingly require contracts that underpin predictable cash flows, which enhances deal bankability and valuation.
Year 4–6: Early Bank Engagement & Financing Strategy
Engage SBA-approved lenders familiar with A/E/LS firms to pre-qualify employee buyers. Current SBA 7(a) loan programs support up to 90% financing with down payments around 10%. Interest rates range between 10.25% and 13.75% in 2025, with slightly reduced guarantee fees increasing loan affordability. The Step-Up Legacy Plan™ leverages these financing options to provide sellers with near 100% cash at closing, eliminating seller carrybacks and personal guarantees.
This disciplined roadmap aligns with current SBA loan trends that favor detailed financial transparency, solid client contracts, and prepared internal leadership—keys to unlocking competitive valuation multiples currently observed in 2025, ranging from revenue multiples near 0.75x to 1x and EBITDA multiples around 4x to 7x depending on geography and firm size.
Moreover, emerging diligence factors like cybersecurity risk assessments and remote work contract documentation have become integral to buyer evaluation. Firms that proactively manage these mitigate risks that otherwise depress deal value or prolong closing timelines.
Practical due diligence now includes secure documentation of data governance policies, cyber incident response plans, and remote employee protocols. These reduce buyer hesitance and support favorable SBA loan underwriting.
Proactive legal, financial, and cyber due diligence transforms risks into buyer confidence, enhancing deal value and financing feasibility.
Effective coordination of your advisory team is paramount. Your transaction broker, CPA, and attorney must align early on to streamline due diligence phases. The broker facilitates confidential marketing and buyer vetting, the CPA ensures audited or reviewed financials are crisp and recast appropriately to reflect normalized earnings, and the attorney vets contract enforceability, client guarantee language, and compliance aspects including cybersecurity and remote work policies.
By following these multi-year milestones, you avoid last-minute surprises that detract from valuation or stall deal progress.
Here is a refined due diligence checklist tailored to 2025 priorities:
Integrating SBA lender requirements into this process ensures employee buyers can qualify for loans without seller carrybacks or personal guarantees, critical to achieving full or near-full seller payment at closing.
With thorough preparation and expert advisory coordination, your firm’s succession can proceed with confidence, preserving your legacy, maximizing liquidity, and empowering trusted employees to become owners under modern, bankable financing structures like the Step-Up Legacy Plan™.
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.
