The #1 Misconception About Exiting Your Construction Company (That’s Costing Owners Millions)

Short answer:  The biggest misconception about exiting a contracting company is believing that selling to a third party is the only way to achieve full value. In reality, ESOP transactions are completed at fair market value, which is typically higher than a financial buyer and within about 5% of a strategic buyer. Furthermore, unlike a 3rd party sale, a sale to an ESOPs allows owners to retain operational control and protect their company’s employees and legacy.

Why This Misconception Is So Widespread

In the contracting world, exit options are typically framed as: “Sell to a financial buyer like private equity, or a strategic buyer like a competitor, or you’re likely leaving money on the table.”

That idea gets repeated so often it starts to feel like fact. Business brokers and investment bankers talk about “top dollar.” Owners hear war stories. Rumors circulate at trade events. And before long, the assumption becomes baked in: if I don’t sell to a third party, I won’t get full value.

The problem? That assumption is wrong, and it can be very expensive as it overlooks a more flexible and lucrative exit option: a sale to an ESOP.

What “Full Value” Actually Means in an Exit for Construction Company Owners

Here’s where the conversation usually goes off track.

“Full value” is often framed as:

• The highest headline number
• The biggest multiple
• The most aggressive offer on paper

But in reality, value is defined by fair market value, not hype, and especially not by promises tied to future performance you no longer control.

In an ESOP transaction, value is:

• Determined through an arms-length negotiation with a motivated buyer advised by an independent valuation firm
• Designed to reflect what a willing buyer would pay a willing seller, with neither under pressure
• Intended to provide sellers full fair market value

And here’s the part that surprises most owners:

• ESOPs often value higher than financial buyers and land within roughly 5% of what a strategic buyer might pay, all without requiring you to walk away from the business. You remain in control, on your terms and your timeline. 
• ESOP-specific tax benefits and transaction terms further enhance the value to selling shareholders, enabling them to realize greater net wealth than a traditional sale.

The Hidden Tradeoffs of Third-Party Sales

Let’s back up for a moment and take a closer look at third-party exits, just for a bit more clarity and context. They can look attractive on the surface, but they often come with strings attached that don’t show up in the headline number.

Common tradeoffs include:

• Earn-outs tied to performance after the sale
• Loss of operational control
• Cultural shifts that impact employees and customers
• Pressure to grow faster, cut costs, or change how work gets done
• Personal risk if targets aren’t met

In construction especially, where relationships, reputation, and execution matter, those changes can ripple quickly (and painfully).

Many owners don’t realize until after the deal that they traded certainty and control for a number that was never fully guaranteed.

For many business owners, failing to consider an ESOP as an option is a very expensive mistake.

How ESOPs Reframe the Exit Conversation

An ESOP isn’t about “settling” for less. It’s about structuring an exit differently.

With an ESOP:

• The transaction occurs at fair market value
• The owner can retain operational control
• The company continues operating under the leadership that built it
• Employees become owners, strengthening retention and alignment
• The business remains independent and locally rooted

Instead of extracting value and walking away, owners are converting value in a way that preserves what made the company valuable in the first place.

For many construction companies, that’s not a compromise. It’s an upgrade.

The “Second Bite of the Apple” Most Owners Don’t Expect

Another often-overlooked benefit of an ESOP is what’s commonly called the second bite of the apple. This isn’t just paper value, but a second payout. 

How does it work?

In a sale to an ESOP, owners may retain a significant equity stake in their business. This equity allows sellers to participate in the future growth of the company they previously sold. This creates a second, very real opportunity to monetize value, typically at higher valuation than the first transaction. Unlike a one-and-done private equity sale, an ESOP can turn an exit into a staged wealth strategy, allowing owners to capture value more than once while staying operationally involved.

A Better Question to Ask

Instead of asking: “Which exit pays the most at closing?”

A more productive question is: “Which exit yields the most net-tax wealth while protecting the company, the people, and the control I care about?”

For many construction owners, that question leads straight to an ESOP conversation, and often much earlier than they expected.

Frequently Asked Questions

Q. Will I lose control if I sell to an ESOP?
No. Owners may retain operational control post-transaction, continuing to lead the business day-to-day.

Q. How do ESOP valuations compare to other buyers?
ESOPs often value higher than financial buyers and typically fall within about 5% of a strategic buyer’s valuation, without the same loss of control.

Q. How do ESOPs compare to 3rd party sales in terms of wealth outcomes for sellers?

In an ESOP transaction the negotiated value of the business is very close to what 3rd party would pay; however, a well structured ESOP sale with significant tax benefits and a second bite of the apple generates greater wealth for sellers.

Q. Are ESOPs only for very large construction companies?
No. ESOPs can be a fit for mid-sized construction companies with strong leadership, consistent cash flow, and a long-term mindset.

Q. Is an ESOP an exit or a transition?
It can be both. Many owners use ESOPs as a phased exit, monetizing ownership while staying in control during the transition period.