Your key employees already know your firm's culture, clients, and workflow intimately. In 2025, with updated SBA financing options, they can become owners while you receive 100% cash at closing, preserving your legacy and securing your retirement.
The Step-Up Legacy Plan™ stands as a modern, bank-friendly alternative to costly ESOPs, eliminating seller financing risk and simplifying transitions for A/E/LS firms with revenues between $1M and $8M. This approach aligns with today’s financing environment, leveraging SBA 7(a) loans that require about 10% down from buyers.
Understanding what motivates owners to choose employee buyouts and how evolving financing structures and valuation benchmarks influence deals in 2025 is critical to making informed succession decisions.
Employee ownership preserves your firm’s culture while delivering full seller payment upfront.
A/E/LS firm owners often choose to sell to key employees to preserve the business culture, client relationships, and legacy they’ve built over decades. Unlike third-party sales, internal transfers empower trusted employees who understand the firm’s unique project-based revenue and operational models.
Key motivations include:
In 2025, advances in SBA 7(a) loan programs with guarantee fee reductions and caps at $5 million facilitate employee buyouts with down payments typically near 10%. Despite increased interest rates (10.25% to 13.75%), longer amortizations (up to 25 years with real estate) keep payments manageable for buyers.
Owners benefit from structuring deals under the Step-Up Legacy Plan™, which uses SBA financing to deliver sellers near 100% cash at closing, eliminating the need for complex, costly ESOP setups, which frequently exceed $150,000 upfront plus ongoing administrative fees.
Common financing structures in A/E/LS transitions include:
Valuation multiples in 2025 for A/E/LS firms range widely but typically fall between 4x and 7x EBITDA or 0.75x to 1.1x revenue depending on niche, geography, and financial transparency. Firms with groomed leadership, secured client contracts, and documented backlog command premium values and smoother SBA financing.
Due diligence increasingly includes cybersecurity measures, contract strength, and remote workforce management—factors that influence lender confidence and employee buyer readiness.
Compared to ESOPs and third-party sales, the Step-Up Legacy Plan™ offers a streamlined, cost-effective strategy that aligns with modern SBA lending trends and owner objectives.
Updated SBA loan programs unlock bankable employee buyouts that pay owners near 100% cash upfront.
Implementing a successful employee buyout involves careful, multi-year preparation. A typical 5-7 year roadmap incorporates:
This disciplined approach helps internal buyers secure SBA loans that typically finance 90% of the purchase price, with about 10% equity required, avoiding seller carrybacks and complex personal guarantees.
Owners who follow this plan receive near full payment at closing, protecting their retirement funding while ensuring their trusted employees become owners aligned with the firm’s culture and clients.
Engaging advisors with specialized expertise in SBA financing, firm valuation, and legacy transitions is key to navigating evolving regulatory and market environments in 2025.
Beyond pure financing, successful transitions prioritize nurturing the ready leadership team and formalizing operational workflows to reduce transition risk—a critical factor for banks and buyers alike.
Compared with costly ESOPs—with six-figure setup fees and ongoing trustee expenses—the Step-Up Legacy Plan™ offers a practical path that maximizes upfront liquidity, simplifies deal complexity, and aligns with A/E/LS firm values and size.
With rising private equity interest in the sector, owners who plan early and choose employee ownership can maintain independence, protect their firm’s culture, and enjoy financial certainty at exit.
Your A/E/LS firm’s legacy deserves protection through thoughtful succession planning. With the Step-Up Legacy Plan™, you can exit on your terms, receive near 100% cash at closing, and empower your employees to lead your firm into the future.
Starting your 5 to 7 year roadmap today enables disciplined leadership grooming, financial transparency, and early bank engagement—critical steps to unlocking firm value and ensuring smooth ownership transition.
Contact Allen Business Advisors to explore how this proven approach can safeguard your legacy and maximize your retirement proceeds in 2025 and beyond.
