Employees and Key-Person Risk When Buying a Business

A business is not transferable if its know-how, customers or delivery capacity leave with one person. People risk is often hidden inside an otherwise attractive profit figure.

Map who makes the business work

List the tasks, relationships and decisions currently handled by the owner, managers and key employees. Identify who can sell, deliver, quote, schedule, manage suppliers and solve customer problems without the seller.

Review employment obligations

Ask for employment agreements, wage information, leave balances, contractor arrangements, performance issues and any disputes. Check what obligations transfer and whether staffing levels are sufficient for the forecast earnings. Employment advice should come from a qualified New Zealand adviser.

Test the transition

A good handover plan includes introductions to key customers and suppliers, training, system access, documented procedures and a realistic period of seller support. Price the business on the earnings a buyer can actually maintain, then use the valuation tool to see which assumptions are doing the most work.