Best Practices for Navigating Key-Person Risk in Acquisitions?

searcher profile

May 22, 2025

by a searcher from Tufts University in Malden, MA, USA

I’ve come across multiple deals recently where the SDE looks solid — but only because the owner is still wearing most of the hats: sales, estimating, scheduling, even directly managing crews or projects. Curious what best practices others have used to evaluate or mitigate this kind of key-person risk. How do you approach transition planning, team depth, or deciding whether to move forward at all? For context, I’m focused on commercial and home service businesses, coming from a strategy consulting background (no trades experience). The long-term vision is to build out a clear management layer, breaking apart the owner’s role into sales, operations, and finance. Always looking to learn from others who’ve been through it — happy to connect if you’re open to sharing experiences.
1
2
76
Replies
2
commentor profile
Reply by a lender
from University of Missouri in Denver, CO, USA
A forgivable note based on revenue, gross profit, or key customers. This shifts some of the risk back to the seller. Also, looking for businesses that have a GM or someone similar that is also a part of these key relationships / sales.
commentor profile
Reply by an admin
from Massachusetts Institute of Technology in Portland, OR, USA
^redacted have previously commented on Key-Person risk and might be able to help here.
Join the discussion