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

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

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.

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