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Lesson B202.10 · Business Finance 202: Build a Business Worth Buying

Exit and succession: selling to a competitor, employee, family, individual buyer or private equity

7-minute read · Figures checked October 2026

An older person's hands sign a document with a ballpoint pen

Photo: Matthias Zomer / Pexels, Pexels License

The short answer

Plan your exit at least three years out. When a small pavement business sells, the buyer is most often a competitor, an employee, a family member or an individual buyer using an SBA loan; private-equity-backed groups buy some, usually bigger companies or add-ons near their branches. Expect to help pay for it: most buyers expect some seller financing, and SBA-financed buyers may ask the seller to carry part of the price as a note on standby. Closing the business well is a good ending too.

Routes, and who they fit

RouteFits whenWatch for
CompetitorYour customers, crews or equipment fit their territoryThey're also your rival, so guard your numbers
EmployeeA foreman or office lead already runs much of the workThey rarely have the cash; expect an SBA loan and a seller note
FamilyA son, daughter or relative wants it and can run itFairness to other heirs; set it up with a CPA and attorney
Individual buyerSteady, documented SDEYour note on standby and your time training them
Private-equity-backed groupYour size and location fit their planDeal shape: cash, a share of the group, earnouts
Closing downNo buyer fits, or you choose to stopFinal wages, taxes, customers and equipment

The prep takes years; the sale itself takes months. Service businesses that sold through BizBuySell in the second quarter of 2026 spent a median 155 days on the market.

Closing well is a real ending. Finish or hand off open work and warranties, pay final wages and payroll taxes, file final returns (the IRS lists each step), sell the equipment, and tell customers who to call. A hard ending doesn't define you. Plenty of good owners close one business and build a good life after it.

How buyers pay, and why you'll probably carry part of it

In BizBuySell's second-quarter 2026 survey, 78% of buyers expected to use SBA financing and 90% expected some seller financing, while only 29% of owners planned to offer it. Under current SBA rules, as lenders summarize them, a buyer taking over a whole business must bring 10% of the project cost. For a first-time buyer, that 10% can't be waived, and up to half of it can be a seller note on full standby, with no payments for the life of the SBA loan. The business's past cash flow must also cover the new debt 1.25 times. Every such sale needs a business valuation, and a quality of earnings report is required at prices of $3 million or more.

Example (made-up numbers). Carol (example) agrees to sell her 22-person company to her foreman, Tomas (example). To keep the math simple, say the whole project cost is the $1,500,000 price. Tomas must bring 10%, or $150,000. He has $75,000 saved, so Carol carries the other $75,000 as a note on full standby. The SBA loan covers the remaining $1,350,000, if the lender's numbers work. Carol receives $1,425,000 at closing, before her taxes, fees and any debts she pays off, and waits years for the last $75,000.

Know which dollars arrive at closing and which come later, before you agree to a price.

Private equity: platforms, add-ons and deal shapes

A platform is the first, larger company a private-equity fund buys in a trade; add-ons are smaller companies it buys next, usually near its branches. Size criteria tell the story: Trivest's Discovery fund targets $1–4 million of EBITDA and Mangrove Equity $3–10 million for platforms, while Mangrove's page for A&R Sealcoating seeks Midwest and Northeast add-ons with at least $250,000 of EBITDA.

Examples from the trade, not endorsements: Mangrove launched Peak Pavement Group in June 2026 around A&R Sealcoating, with partner companies in Michigan and Pennsylvania that keep their names and founders and receive upfront cash plus a share of the larger group. AEA Investors and BCI bought Pave America in 2025 (27 branches, 1,600+ employees). Kansas Asphalt of Bucyrus, Kansas, joined Pave America in 2023 with its CEO and team staying on. The Sterling Group's Pavement Preservation Group bought Holbrook Asphalt and Integrated Pavement Solutions in January 2026.

Deals like these often mix cash at closing, a share of the larger group, payments tied to future results (an earnout) and a job running your branch. Ask how and when your share can be sold, who decides, and what happens to it if you leave. Most owners never sell to private equity, and plenty build good lives anyway.

The process, your people and taxes

  1. Advisers: an attorney who handles business sales, your CPA, and often a business broker or M&A adviser.
  2. Confidentiality: a signed confidentiality agreement before any buyer sees your numbers.
  3. Letter of intent: price, how it's paid (cash, notes, earnout, equity), what's included, working capital and how long you deal only with this buyer.
  4. Due diligence: books, returns, contracts, equipment, safety and insurance records, employees.
  5. Closing and transition: the purchase agreement, then training the new owner. SBA rules limit how long and in what role a seller can stay after a full SBA-financed sale, so ask the buyer's lender.

Decide early when key people hear and what the buyer plans for your crew. Buyers often want to meet key people before closing.

Taxes shape what you keep. The IRS treats a sale of business assets as a sale of each asset, so how the price is split among equipment, goodwill and the rest changes the tax bill, and buyer and seller both report the split on Form 8594. Depreciation and Section 179 deductions taken on equipment can come back as ordinary income when it's sold. Plan the structure with your CPA before you sign a letter of intent.

Your Move

Do this week

  1. Write your first-choice route and a backup.
  2. Pick a target year and work backward: what the books, customer mix and managers need to look like by then.
  3. List your advisers and book one first meeting.
  4. Decide whether you'd carry a seller note, how much, and on what terms, including standby.
  5. Put a yearly review of the outline on the calendar.

Log it: Three-year exit outline written.

Common questions

How long does it take to sell a small business?

The prep takes years. The sale itself took a median 155 days on the market for service businesses that sold through BizBuySell in the second quarter of 2026.

Do I have to finance part of the sale?

Not always, but most buyers expect it. With an SBA buyer, any seller note that counts toward the buyer's 10% must sit on full standby for the life of the SBA loan.

Can I sell to my employees?

Yes, and many owners do. A foreman or office lead often knows the work best but has little cash, so expect an SBA loan, a seller note and a longer handoff.

Watch out for

  • Selling to the first caller without a valuation or advisers.
  • Sharing financial statements before a confidentiality agreement is signed.
  • An earnout or equity share you can't explain in one sentence.
  • Letting the business slide during talks. Run it as if you're keeping it, because the deal may not close.

The National Pavement Maintenance Contractors Association (NPMCA) publishes this lesson. NPMCA's data affiliate may earn fees from private-equity introductions. The lesson above is the same either way.

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Lesson check

5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.

This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.

Sources

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