In this short advisory, the speaker explains that most trade businesses have a single "rock star" employee who holds the operation together. Buyers focus on this person because their presence reduces risk and can increase the sale price, while owner‑dependency drives the price down. The speaker offers a simple test—if the owner were absent for 30 days, whose phone would ring? He outlines two common deal failures: (1) new owners cutting salaries, causing key staff to leave, and (2) owners selling to internal operators who lack buying expertise. To avoid these pitfalls, he recommends: naming the key employee, documenting their daily responsibilities, customers, vendors, and licenses; reviewing and adjusting their compensation; creating a retention plan with legal and CPA advice; keeping the sale confidential but informing the key person before a buyer does; and gradually delegating the owner’s calls to the employee. These steps both strengthen the business now and make it more attractive to buyers, regardless of whether a sale ultimately occurs.
Chapters
Last week, a buyer asked me how you take over a company in a trade you're not licensed in. I told him what I tell everybody. Somewhere inside most of these businesses, especially in the trades, there's an absolute rock star. One person who is really keeping the whole thing together. That's the person you're going to lean on heavily, and you're going to end up paying that person pretty well because you need them to take over. Now flip that around. If you own the business, every serious buyer is going to go looking for that person in your company. So who is it? Here's a simple test. If you were gone for 30 days, who would the phone ring for? If the answer is a strong general manager or an office manager who holds it all together, that's good news. A buyer sees someone who can carry the business through the handoff, and that lowers the risk. If the answer is only you, the buyer sees risk. And risk shows up in the price. Or the structure. Or both. I hear this 2 or 3 times a week. An owner tells me they operate above the business. Then, halfway through our call, hold on, I have to take this. Most of the time, that's an easy fix. For a lot of owners, the dependency is just their own ego in the way. I can say that because I'm the same way. I always have to have my hands in everything. Where do deals go wrong with key people? 2 places. First, a new owner comes in and tries to maximize everything, starting with salaries. In the trades today, good people can just go to a different company and make the money. Pay people the right way, treat them the right way, and you'll find the people you need inside these companies. Second, an owner sells to a couple of people inside the business. They drop the ball, and now he's back in, trying to make it right. A great operator isn't automatically a great buyer. So what do you do now? Name the person. Put their role on paper— what they do every day, and which customers, vendors and licenses run through them. Look at their pay. Because if they're underpaid, a buyer will fix it out of your price or watch them leave. Talk to your attorney and CPA about a retention plan. Keep a possible sale quiet, but don't let your key person hear about it from a buyer first. And start handing them the calls you've been taking. None of that means you're selling. It makes the business stronger, whatever you decide.
