Identifying Key People Risks

Your agency is only as strong as its weakest link. And if that link is a single person, you’re playing with fire. Key Man Risk is the ugly truth most agency owners don’t want to face. It’s that terrifying moment when you realize your entire operation hinges on one person—maybe it’s you, maybe it’s your top performer. But here’s the kicker: if that person leaves, so does your business stability. Why is Key Man Risk so detrimental? ⚆ Fragile Foundations: If your agency can’t function without one person, you’re not running a business—you’re running a house of cards. The minute that key player leaves, the whole thing collapses. ⚆ Stunted Growth: With all the power in one person’s hands, you limit your agency’s ability to scale. Growth happens when knowledge and responsibility are spread across the team—not concentrated in one individual. ⚆ Reduced Valuation: Buyers and investors see key man risk as a massive red flag. If your agency is dependent on one person, it’s less valuable and far riskier to buy. How do you fix it? ⚆ Documentation and Systems: Get everything out of your head (or your key player’s head) and into playbooks, SOPs, and workflows. Systems don’t quit—people do. ⚆ Cross-Training: Make sure no task is owned by just one person. Cross-train your team so that if someone leaves, there’s always someone else ready to step in. ⚆ Empower Your Team: Shift the spotlight from one key person to the entire team. Build a culture of shared knowledge, accountability, and leadership. Your agency should thrive because of the collective power of the team, not the heroics of one person. Key Man Risk is like a leak in a boat—it might seem small now, but ignore it long enough, and you’ll be sinking fast. Fix it before it becomes your agency’s downfall.

In the 1970s, 80% of company value was tangible assets. Today, it's flipped to 85% intangible. But here's the kicker — most of that value walks out the door every night. Donald H Taylor just dropped this insight on my podcast, and it completely shifted how I think about business risk: "People are not like machinery. They can get up and walk. And if so much of the value of a company is embedded in the people, then you've got to make sure that when people walk out of the company... they don't take with them the secret sauce of the organization." Think about it: Your best sales rep knows which prospects to prioritize (not in the CRM). Your lead engineer understands why certain decisions were made (not in the docs). Your customer success manager has built relationships that can't be replicated (not in any system). When they leave, that knowledge disappears. This isn't just an HR problem. This isn't just a training issue. This is a strategic business continuity crisis. The companies that figure out how to capture and transfer this "secret sauce" before people walk out? They'll have an unfair advantage. The ones that don't will keep losing their competitive edge Watch the full episode here: https://lnkd.in/gkkdGyhm

If your business can't run without you, you don’t really own it. It owns you. We all want to feel important. Indispensable. Valuable. But the more your business depends on you and other key people, the less valuable it is. A business built on smart people solving complex problems sounds impressive. But to a buyer, it’s risky. If you ever want to exit, start preparing now. Acquirers don't like to buy businesses that are dependent on people because people are unpredictable: • They leave. • Get sick. • Have bad days. • Want more money. I learned this the hard way in my first business. For years, I relied on a team of brilliant minds. They were rock stars. They were also high-maintenance. I felt on edge. Always on high alert. Because my business not only depended on me, it required key people with special knowledge. If your business relies on you or a few key people, it’s not an asset. It’s a liability. What happens if you or a key employee: • Burns out? • Changes careers? • Gets hospitalized? • Develops a serious illness? What happens if a key employee: • Starts their own business? • Goes to work for a client? • Is recruited by the competition? I finally realized: Freedom doesn’t come from brilliant people. It comes from brilliant systems. So I changed my business model. We stopped doing custom work and built a scalable business. Instead of rock stars, We hired people who could follow a system. Make your business easy to love. Simplify. Systematize. Scale. Start here: 1. Keep a log of decisions you and key employees make. 2. Identify single points of failure: - Who holds critical knowledge? - Who are your clients dependent on? - What processes break down without key people? 3. For everything in your business, ask: - Can this be eliminated? - How can this be simplified? - How can this be automated? - How can it be documented? Every dependency you remove makes your business more valuable. And gives you more freedom.

I was in a meeting with a founder yesterday, prepping his company for a sale. I asked, “Do you have any heroes on the team?” He lit up. “Absolutely—David, our lead engineer. He’s a magician.” I know that look. That founder pride. That deep sense of relief: “We’d be lost without him.” But I had to tell him the hard truth: “Buyers don’t want to buy magicians. In fact, they’re terrified of them.” And I get it. We love our heroes. The ones who fix what no one else can. Who pull rabbits out of hats. Who make the impossible seem easy. But let me ask you something: What happens when your magician takes a vacation? When a recruiter DMs them? When they burn out—or move on? That quiet panic you feel? That’s your gut telling you your company’s value walks out the door every evening. 🚫 The problem isn’t your hero. The problem is building a business that requires heroics to function. Because buyers don’t pay a premium for brilliance. They pay a premium for repeatability. The most valuable companies aren’t built on heroes. They’re built on systems. ➟ Playbooks that make new hires productive fast ➟ Cross-training that prevents key-person risk ➟ Documentation that lets the engine run—no matter who’s in the seat The shift? 🧠 From relying on great people… 🧠 To building great processes that people can run. Buyers can’t underwrite a magician. But they will pay a massive premium for a well-oiled machine. → Want to know what else buyers look for beyond the numbers? Download the Sellability Checklist (link in comment). #MandA #ExitStrategy #KeyPersonRisk #FounderAdvice #BusinessValuation #OperationalExcellence #TeamStructure

You can’t manage what you can’t see. When it comes to people risk, most CEOs, CFOs, and CHROs only respond once the damage is already on the balance sheet. But the most effective leaders? They learn to map the risk before it hits. People risk isn’t just about turnover or compliance—it’s the unseen friction that slows growth:  • Misaligned leaders  • Gaps in readiness or skill  • Cultural drag  • Talent density that can't keep up with scale Left unaddressed, these issues quietly compound, and suddenly you’re reacting instead of leading. Here’s how to think about people risk like an operator: 1. Identify the real risks.  Not just the obvious stuff. Look for fragility in places others ignore: decision bottlenecks, single points of failure, untested successors, or unclear ownership. 2. Quantify the cost.  What would it actually cost if that VP walks, if hiring stalls, or if your team starts burning out in Q4? Put numbers to the risk. Otherwise, it stays invisible. 3. Prioritize and plan.  Not every issue is a fire. Some need a fast fix, others a long-game strategy. The key is clarity: know what matters most and build resilience where it counts. This isn’t just HR. It’s operational foresight. If you want to shift from reactive to ready, let’s talk. P.S. What’s your biggest people risk right now? DM me “Consultation Call” or grab time via the pinned 📌 comment below.

In Micro SaaS, founders wear multiple hats. This hands-on approach keeps things lean and agile, which is good for profit margin and BAD for potential acquirers... When a key player leaves (following a Sale), it can send a negative ripple effect through the business. 'Key employee risk' will without question be a top three risk in every deal... Replacing or shifting responsibilities isn't easy when resources are limited and roles are interconnected. But the biggest hurdle is knowledge transfer. When key information is siloed with key players, with little to no documentation or training, it's hard for others to step in seamlessly. This is especially true when that person also plays a significant role in maintaining team dynamics and customer relationships. So, how do you manage this risk? // Prioritize knowledge sharing from day one. Keep all critical information accessible to everyone. // Create modular roles that define responsibilities but also have some overlap to ensure no single point of failure exists. // Foster a culture of shared ownership. When everyone feels responsible for business success, transitions are smoother, and continuity is maintained even when key players leave. // Plan for succession early on. This proactive approach helps identify potential knowledge gaps and reduces dependence on a single person. // Finally, diversify who manages client and partner relationships. By ensuring that these connections are spread across multiple team members, you reduce the risk of disruptions. I’ve outlined some steps below to help manage these transitions. The ultimate goal here is to build an operation that is more than the sum of its parts—one that can adapt and thrive, no matter the changes. Not only does this approach minimize risk, but it also gives you a competitive edge, helping your business stay strong and flexible. If you want to learn more about acquiring and operating Micro SaaS, please follow my Substack: https://lnkd.in/grAv-RgD For the love of the game 🏴☠️ ⚡ #Culture #HR #Management #Leadership #Strategy 

A deal could be a big winner or loser - depending on this one thing. (Many investors overlook this step) One of the hardest parts of M&A transactions is integration. This is when the acquired entity “plays well” with the takeover company. It's the last step on this list, but in many ways, it's the beginning. You don’t want to go through this arduous process just to fail hard at the very end. De-risk integration by getting deal intel on: 1. Key person risk Investors assume this is the founders. Sometimes, but not always. It can also be day to day managers in the trenches - who might be feeling unappreciated, and get upset when they learn the founders got rich off a sale, but they didn't get any upside. 2. Proprietary expertise Will the company fall apart if certain people left? Again, most dealmakers only focus on the founders! But what if the product you’re dealing with has such specialized engineering knowledge that even if one member of that team left, you would have such a large knowledge gap and stop progress for 6 months to a year? The takeaway: Get deal intel on integration early in the M&A process. Look for key person risks: - Understand the limitations of the founders - Structure incentives (eg. earnouts) for key non-founder employees - Assess the sentiment of technical employees that are hard to replace I've worked with investors who were world class at steps 1 through 9, but treated step 10 as an afterthought. Most of the time, it's the things outside of the spreadsheet that are likely to ruin the deal. Image source: DealRoom #mergersandaquisitions #duedilligence #privateequity

🚨 Is Focusing Only on Revenue the Wrong Strategy? 🚨 Everyone talks about revenue and profit as the golden metrics. 📊 But here's the truth: When it comes to building a sellable business, focusing only on these numbers might lead you straight into a trap. ⚠️ You might be thinking, “Wait, isn’t that what potential buyers want?” Yes… and no. Sure, buyers care about numbers. But they’re also looking beyond the surface. 🌊 Here are some hidden challenges that can make your business unsellable, even with stellar financials: 👉 Key Person Dependency: If the business crumbles without you or one key employee, that’s a massive red flag 🚩. Buyers are risk-averse. They want a business that runs like a well-oiled machine, with and ideally without you needing to spin those plates 👉 Customer Concentration: If a single customer makes up more than 20% of your revenue, you're vulnerable. A report by IBISWorld shows that businesses with diversified customer bases sell at higher multiples. Don’t let one client hold all the power 💼. 👉 Scalable Systems: Buyers want to see that your business can grow beyond its current capacity without collapsing under the weight. Do you have processes documented? Automated? Can the operations handle double the demand? 🔄 👉 Cultural Alignment: No one talks about culture enough in sales, but misaligned cultures can tank deals fast. Think of it like a marriage 💍—if the buyer’s values clash with your team’s, the honeymoon will be short-lived. Identifying these issues isn't just about checking off a list. Ask yourself: "If I took a month off (really off, yes, I mean gone, really gone), would the business still thrive?" Are there processes and systems anyone could step into, or is it chaos without you? It’s about building something bigger than you. 🏗️ 🔍 Look deeper than your P&L. Observe where the dependencies lie. Talk to your advisors about how to diversify risk. And most importantly, plan ahead. Are you building a business that could thrive without you in it? 🤔 Drop your thoughts in the comments below—what's the hidden challenge you're working on in your business right now? 👇

Selling umbrellas to people already standing in the rain. That’s what human risk management feels like today. Let me say the quiet part out loud: We keep selling tools, consulting, and “solutions” to practitioners who already know the risks. They know how insider threats happen. They know how IP walks out the door. They can spot the warning signs of sabotage, fraud, workplace violence, espionage, negligence. They know. But they’re stuck. WHY? Because the folks holding the checkbook—the C-suite and board—don’t understand the threat. Or worse, they don’t think it’s their problem. News flash: When leadership ignores human risk, they’re not “saving money.” They’re gambling with their IP, reputation, and people’s safety. Practitioners aren’t lacking solutions. They’re lacking leadership support. And frankly, they’re tired of begging for it (I know because I was). Here’s the radical (but obvious) pivot: Stop selling to the people who already get it. Start educating the ones who don’t. The real ROI isn’t in another dashboard. It’s in C-suite buy-in. Because when leadership understands that human risk means: ✔️ Disengagement that quietly erodes vigilance (When people stop caring, they stop protecting.) ✔️ Microstressors stacking into major security gaps (Small daily frustrations that lead to costly mistakes.) ✔️ Burnout turning your best employees into your biggest vulnerabilities (Exhausted people miss red flags—and create new ones.) ✔️ Unspoken grievances festering into insider sabotage (When people don’t feel heard, they act out in ways leadership doesn’t see coming.) ✔️ Everyday human habits becoming attack vectors (Cutting corners, weak passwords, and casual oversharing.) ✔️ Vendors and third parties slipping through the cracks (Outsiders with inside access are still your risk.) ✔️ Lack of psychological safety silencing early warnings (If people fear speaking up, threats stay hidden until it’s too late.) ✔️ Social engineering thriving on trust and distraction (Because a human click will bypass your best firewall.) ✔️ Unchecked access creeping beyond what’s needed (Privilege creep = data leaks.) ✔️ Culture misalignment amplifying foreign influence risk (When values diverge, vulnerabilities multiply.) …it stops being “someone else’s problem” and becomes an enterprise priority. Ignoring human risk isn’t just a “company problem.” It becomes your problem when regulators, shareholders, or the media (or, worse, those nasty social media armies) come knocking. You can’t solve a problem leadership refuses to believe exists. Support your practitioners by enlightening your executives. It’s not about fear. It’s about facing reality. If you employ humans, you’ve got human risk. Period. (And if your leadership still doesn’t get it, let’s talk.) #HumanRisk #InsiderThreats #Leadership #CISO #BoardEducation #IPProtection #RiskManagement

Tesla is once again in the spotlight, not for its innovation or earnings, but due to its CEO’s recent "entanglements". Last week, the company’s stocks were down by 30% and faced downgrades. A scrutiny of the stock plummet shows that it stemmed not only from operational performance but also from Musk’s public feuds. This scenario illustrates a textbook example of key man risk, the inherent vulnerability a company faces when it is overly dependent on one individual. Key man risk is the potential negative impact on a company’s operations, reputation, or stock price due to the departure, incapacity, or behaviour of a central executive, typically a founder or CEO. It is usually acute in companies where the individual is deeply tied to investor confidence, strategic decisions, and the public image of the brand. Elon Musk is Tesla’s visionary, its public face, and arguably its greatest marketing asset. But he is also its biggest liability when it comes to reputational risk. From his tweets and management styles to political statements and regulatory issues, his personal behaviour has repeatedly influenced Tesla’s stock in ways that have little to do with fundamentals. This isn’t the first time investors have been reminded that when one person becomes the company, the company is vulnerable to that person's every move, on and off the balance sheet. - When markets start reacting more to press conferences than profit margins, that’s a red flag. - When analyst reports weigh a CEO’s personal controversies as much as they do product performance, that’s key man risk in real time. Tesla’s current reality raises broader questions for founders, boards, and investors alike: a) How much of your company's value is tied to one individual? b) Is your leadership bench deep enough to maintain confidence in a crisis? c) Have you built a culture and brand that can stand without its founder? We’ve seen this before: WeWork’s collapse after Adam Neumann’s ouster Alibaba’s valuation shocks following Jack Ma’s regulatory run-ins Apple’s brief dip when Steve Jobs resigned in 2011 For early-stage startups and even public companies, managing key man risk isn’t just good governance. It’s strategic resilience. Founders are assets, but no company should be built on a single point of failure. As Warren Buffett once said: “𝑾𝒉𝒆𝒏 𝒕𝒉𝒆 𝒕𝒊𝒅𝒆 𝒈𝒐𝒆𝒔 𝒐𝒖𝒕, 𝒚𝒐𝒖 𝒅𝒊𝒔𝒄𝒐𝒗𝒆𝒓 𝒘𝒉𝒐’𝒔 𝒃𝒆𝒆𝒏 𝒔𝒘𝒊𝒎𝒎𝒊𝒏𝒈 𝒏𝒂𝒌𝒆𝒅.” Key man risk just might be the cold water.