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Could my foreman or GM buy me out?

If you have typed "selling my business to an employee" into a search box, you probably have one person in mind: the foreman who has run your crews for years, or the GM who already handles the schedule and the hard customers. Your people and customers trust them. The catch is money. Most employees cannot pay cash for a company, so the deal is paid for over time, out of the profits of the business they are buying.

This is not tax or legal advice. Use it to prepare for your CPA and an attorney who does business sales.

Is your employee a real buyer?

Gallup found that 74% of employer business owners plan to sell or transfer the business, yet most have no written succession plan. An employee can be your best buyer if three things are true:

  • They can run the whole company, including pricing jobs and hiring techs.
  • They want to own it, personal guarantees and slow weeks included. Ask them straight out.
  • The business can pay for itself. If profit only covers your pay today, there may be nothing left to fund the buyout.

Take the owner dependence test first. Whatever still needs you, such as sales, estimating or the license, is the work to hand over.

Step 1: Set a fair price

Start from what the company earns. Our free estimate gives an illustrative range; the roofing, plumbing and HVAC valuation pages show how it is built. It is not an appraisal. If a bank is involved, it runs its own numbers, and SBA lenders now verify seller financials against IRS transcripts. If you take a little less from a key employee, decide it with your CPA and put it in writing.

Step 2: Choose how it gets paid for

Way to fund itHow it worksCash to you at closingMain risk for you
Seller noteDown payment, then paid from profitsThe down paymentPayments stop if the business struggles
SBA 7(a) loanA bank lends most of the priceMost of the priceRules on your note and your stay
Staged buyoutThey buy a share now, the rest laterPart now, more laterYou stay an owner until the end
ESOPA trust for employees buys your sharesDepends on financingSetup and yearly costs
RoyaltyThey pay you a share of resultsLittle or noneAll on their results

Seller financing

You lend your employee most of the price. This is usually an installment sale, so under IRS rules you report the gain as you receive payments. The same page warns that a note that lacks adequate stated interest can have part of the principal treated as interest. Your attorney should set the rate, the schedule, the security you can take back and any personal guarantee. Keep your consulting pay in a separate agreement.

An SBA loan

SBA 7(a) loans cap at $5M. Since June 2025 the buyer must put in 10% as an equity injection, and a seller note counts toward it only if it is on full standby for the life of the loan, so expect to wait years for that part. SBA rules also cap how long you can stay on, so ask the lender for the limit before you promise a long handover.

A staged buyout

Your employee buys part of the company now and the rest in later steps. You keep control until the last step. Agree now how each step is priced, using a formula your CPA sets, and what happens if they quit, get hurt or you stop agreeing.

An ESOP

An employee stock ownership plan is a retirement plan that holds company shares in a trust for your employees. The company, often with a bank loan, buys your shares over time. ACHR News covers ESOPs alongside key employee and family sales. It needs a trustee and a yearly valuation, and you still need one leader. We found no published cost figures for trade companies this size, so get a written quote.

If no one can raise the money, owners ask about handing the company to employees for a royalty. You are paid only if they do well, so treat it as a bonus, not your retirement plan.

Worked example

Worked example: Two ways a GM could buy a $1.5M HVAC company (made-up numbers)

The price is $1,500,000. The company earns $450,000 a year in SDE, its profit before the owner's pay and personal costs.

PiecePlan A: seller notePlan B: SBA loan
GM's own cash$150,000$75,000
SBA 7(a) bank loanNone$1,350,000
Your seller note$1,350,000 over 10 years$75,000 on full standby
Cash to you at closing$150,000$1,425,000

Cash at closing is before debt payoff, fees and tax. In Plan B, the GM's $75,000 and your $75,000 standby note make up the 10% injection.

Plan A: you get $135,000 a year before interest. With the GM's pay of, say, $110,000 and the trucks, that fits in $450,000 in a normal year. In a bad year, your payment is at risk.

Plan B: most of your money comes at closing and the bank carries the risk. You wait for the last $75,000.

Try your numbers in the net proceeds calculator, then check them against your spending with the retirement gap tool.

Step 3: Hand over in stages

Advisers tell trade owners to start at least three years ahead.

WhenYour employee takes onYou
24 months beforeEstimating, pricing, a big customerRetention plan; start the license path
12 to 18 months beforeHiring, scheduling, weekly numbersAgree terms; see your CPA, attorney, lender
6 to 12 months beforeRuns the company with you thereAttorney drafts agreements; tell key staff
Closing to 2 years afterOwns itPaid consulting with an end date

For your role after closing, read should I stay on after selling, or walk away.

Step 4: Keep your key people 12 to 24 months before a sale

If your best people leave, the company is worth less to any buyer. PM Magazine's podcast claims incentive plans started 12 to 24 months before a sale can lift value by 15% to 20%. That is their claim; we have not seen the data. Common tools are stay bonuses paid at and after closing, and phantom equity: a cash bonus tied to the sale price, with no real shares. Put them in writing with your attorney and CPA.

Step 5: Plan the licensed successor

The license often belongs to a person, not the company. Florida gives 60 days to employ another qualifying agent after the only one leaves, and California requires a departing qualifier to be replaced within 90 days. If your employee cannot qualify the company on day one, you may need to stay as license holder for a set time. Plumbing owners should read does my plumbing license transfer when I sell.

If no employee is ready, compare the other paths in exit options and selling to family.

Common mistakes

  • Asking too late. An employee needs years to learn the business and get licensed.
  • A handshake deal. Without a signed agreement and note, you have little recourse if payments stop.
  • A note the business cannot carry. Size payments on a normal year, after the new owner's pay.
  • Assuming the license comes along. It usually belongs to a person.

Questions to ask your CPA, attorney or broker

  1. What is a fair price range, and do I need a formal appraisal for an inside sale?
  2. Seller note, SBA loan or staged buyout: which fits my cash needs and taxes?
  3. How is the note taxed as I am paid, and what interest rate does it need?
  4. What security and guarantee should I ask for, and what happens if payments stop?
  5. In an SBA deal, how must my note be set up, and how long can I stay on?
  6. What retention plan would keep my key people, and how is it taxed?
  7. Do the payments plus my other income cover what I spend each year?

Sources

  1. Gallup, Most Small-Business Owners Lack a Succession Plan
  2. CapBench, SBA SOP 50 10 8 rule changes 2025 to 2026
  3. IRS, Topic no. 705, Installment sales
  4. Midas Partners, Financing a plumbing company acquisition
  5. Prencipe International, SBA caps how long your seller can stay
  6. ACHR News, Financial Experts Offer Insight Into Planning a Proper Exit
  7. Reddit r/smallbusiness, What are my options if I can't sell my business?
  8. Contracting Business, The 12 Essential Steps for a Profitable Contracting Exit Strategy, Part I
  9. PM Magazine, Retention: The Best Exit Strategy
  10. Florida Statutes 489.119, Business organizations; qualifying agents
  11. California CSLB, Change in Personnel
  12. Roofing Contractors Association of Texas, Licensing program
  13. Illinois Roofing Industry Licensing Act (225 ILCS 335)
  14. Chisel Industries, How to sell a plumbing business
  15. Texas State Board of Plumbing Examiners, Responsible Master Plumber
  16. Next Era Legal, Selling Your HVAC Business
  17. Texas TDLR, ACR Law and Rules booklet

Questions owners ask

Can my employee get an SBA loan to buy my business?

Often, yes, if the profit can carry the loan and the books match your tax returns. The buyer must put in 10%, and the lender will check who holds the license and how long you will stay.

What happens if my employee stops paying?

That depends on your note. A good note sets a grace period, the security you can take back and when you can step back in. Without those terms you may have to go to court.

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This is an educational estimate, not an appraisal. RetireFromTrades gives an illustrative range based on what you told us and on general market information. It is not a formal business valuation or appraisal, and it is not an offer to buy your business. We are not a business broker, M&A adviser, CPA, lawyer or financial adviser, and nothing here is legal, tax, accounting or investment advice. Real offers depend on your actual financial records, buyer diligence, deal terms and market conditions, and can be higher or lower than this range. Before you make any decision, talk to a licensed professional. If you ask, we can introduce you to an independent licensed business broker; we do not broker, negotiate or take part in any sale.