Key people: Hard acts to follow, hard risks to measure

Description

Abstract: The loss of a “key person” from a business could disrupt day-to-day operations, alarm customers, lenders and suppliers, and drain working capital reserves. But how do valuators quantify the value of key people? This article looks at the factors they consider when evaluating a key person discount and how they judge the ability of others to take over a key person’s responsibilities and relationships. It also discusses the three valuation methods they generally choose from.