Why Key Man is The Number One Deal Killer

Ask any buyer, what is your number one deal killer. Time and time again they are going to say Key Man. In this post, we are going to first define Key Man and, more importantly, what you can do to solve your Key Man issue. 

What is Key Man

Our definition of Key Man: Once you remove a Key Man (person) from a business, the business fails. Most frequently, the Key Man is the Business Owner, however the second biggest culprit is the lead Sales Representative, and the third biggest culprit is someone inside of the business who solely holds technical knowledge. It is also not uncommon for a business to have two Key Men. For example, we’ve worked with businesses where there were two business owners, one who was the gatekeeper for expertise and the other who was responsible for majority of sales revenue. 

Why is Key Man a Deal Killer

Buyers hate Key Man issues because once the business is sold and the Key Man leaves, the business is not sustainable. AKA failure. No Buyer wants to invest millions of dollars in a business to see it go up in smoke. Put yourself in the Buyer’s shoes, would you want to buy your Key Man issue business? 

The type of key Man that we want to solve for is owner Key Man. We’ll address Seller Key Man in other posts. Many owners have been trained to believe that their full control and decision making is what has guided the business to success. Like the Midas touch. If their hands aren’t in the business, bad things will happen. We are here to tell you that the full control approach is categorically wrong. At a certain point in your entrepreneurial journey, you need to spend less time working in the business and more time working on the business. In fact, the more you can make yourself irrelevant in daily operations, the more your business will be worth. But wait, if I take myself away from key client relationships, won’t our clients go to a competitor? What if I’m not doing the work, how will I know it will be done correctly. Do you think Jeff Bezos delivers all of Amazons packages or Jamie Diamond cuts all new business deals for JP Morgan Chase? Of course not! They have teams in place that do it for them. 

Key Man the Growth Killer

In fact, Key Man is not only a deal killer, but it’s also a growth killer. It’s why you hear people say, this person is good at starting up a business, but they aren’t the right person to scale the business. It is because they lack the ability to delegate, and they also lack the ability to trust others to make decisions. It is extremely difficult to be the big idea guy and also be an Operator. They are two totally difficult skill sets. If the Owner is wise, early on, they are able to recognize if they are better as an Operator or idea guy. If they can’t self-recognize, it’s likely their business likely will fail to scale. In larger companies, this is why there is a CEO and a COO. The CEO is responsible for the business’s vision, and the COO operates the business. 

The best way we’ve seen our clients relieve themselves of the Owner Key Man issue is through our seven-step process. 

NOT THE FIRST STEP!: Hire a General Manager, we’ll get to that. 

The first step is to identify what Key Man processes you are solely responsible for. What is it that only you do? It’s ok to write more processes than less processes. A longer list of processes is likely what you actually do on a day-to-day basis. Next, put a star next to the top three most important processes you are responsible for. As part of the first step, you should reflect and document what are successful deliverables for these processes and what makes you reluctant to give up control. 

The second step is to document the top three starred processes as if someone can pick up what you’ve documented and use it as a training guide. The documentation should be good enough for the person reading it to know how to deliver the same results as you. Even though you’ve been performing these steps for many years, what are the critical steps in the process. Where are the most common issues or potential points of failure? If there are issues, how do you resolve the problems? Be detailed. Documentation is one of the most important steps because it allows you to think about the processes as if it was the first time completing the task. You can even go backwards a bit and think about gaps in your current process and fixes that can correct the gaps. 

The third step is to think through the critical metrics of the process you’ve documented. What are the metrics? Time to completion, average sale revenue, or is it a key component of a deal for you to take a decision. Some processes are as simple as a checklist to ensure things have been completed before you can move forward. The point is that every process has key metrics of success.

After you’ve defined the top three key man processes, documented issue resolution, and specified metrics, the fourth step is to write a job description for the person you’d like to hire. 

The fifth step is now you must decide how you want to proceed forward with delegating your work. Do you want to train the existing staff on these processes? Do you want to hire a General Manager to take over the processes. Perhaps you may even need to hire a few people to take over your Key Man responsibilities.  You’ve had many years to learn your Key Man responsibilities and you’re likely much faster than whoever you hire.

Whoever you decide to delegate to, you need to write their new mandate within their job description, even if it’s an existing employee. Why? Because now they own the processes and you do not. Of course you’ll need to train the person on the processes, but the delegation from you to them has been memorialized.

On to the fun part, step number six, training. We like to train critical tasks with a three step approach. I do, you watch. You do, I watch. You do. This approach allows for the trainee to build confidence and have a support system. 

The final step, number seven, is to use the metrics you defined from step two. The metrics can be built will built into a report for you to have control of your business. You can review the metrics to understand if the processes you delegated are in control or out of control 

And, my favorite part is now that you’ve delegated the key man processes, you can ask the person now responsible how they would improve the process. This is called working on the business.

While this is a step-by-step guide, the reality is the implementation is likely to be more difficult. It’s the real world after all. Be patient and have trust in others to do their job. The rewards will be big. Not as much stress on you to work the day-to-day, more growth, higher valuations, no more deal killers.