Eliminate The “Key Person”
What is a Key Person? Are you a Key Person? If you are a Key Person – you need to change things……….. Without realising it, businesses often evolve and grow, and during this growth the business owner’s role will change. The owner knows how everything works, who all the customers are, and all the clients know the owner. The owner has become the “key person”. The key person, is the person that the business relies upon to operate smoothly. It may not necessarily be the owner who is the “key person”, it could be an employee, or even a sub-contractor. If a business cannot operate without one (or more) people, they are deemed to be a ‘key person.’ Ask yourself ‘does any business rely upon a specific person to function normally’ If your business relies upon a “key person” you need to address this and make changes to enable you to be able to sell the business. That is unless you sell the business to the “key person”! Often the business may have a manager, or may rely upon the qualifications of one or more key personnel. This can make buyers nervous too, as they will think to themselves “what will i do if the manager leaves?” To eliminate these potential problems you need to take yourself out of the business, and ensure that key staff are engaged on contracts that “tie” them to the business. This can be difficult and inconvenient, but it must be done. generally speaking, there is a vastly reduced prospect of selling a business at the right price if a Key Person holds the whole enterprise together. You don’t have to get rid of them, (or sack yourself) all that needs to be done is the business changed to reduce the reliance upon that person (or people). If your business trades under your own name, it may be necessary to change the trading name to a more “generic” name quite a while before the business is offered for sale. For example, a business known as “John Smith electronics” might benefit from a name change to something like “comet electronics”, thereby allowing the new owner to takeover the business, without an abrupt change, and without having to operate under the name of another person.