Glossary
Key person risk
The risk that a business would lose significant value, clients or capability if one or a small number of individuals were to leave, step back or become unavailable.
In plain English
In agencies the key people are often the founders: they win the work, hold the client relationships and set the creative or strategic direction. Buyers will ask what happens when those people change roles after a sale, and will structure the deal, through earnouts, transition periods and retention arrangements, to manage the risk.
Key person risk also applies below founder level, to account leads, creative directors and technical specialists who hold relationships or know-how.
Why it matters
Reducing key person risk is one of the most valuable things a founder can do before a sale, and one of the slowest, because it means building a leadership team and handing over relationships deliberately.
What to watch for
- Map who holds each client relationship and each critical capability.
- Build and incentivise a second tier of leadership.
- Document processes and knowledge so they do not sit in one head.
Transaction language and legal treatment depend on the agreement and the jurisdiction. Written by Motion Advisory Partners as general guidance, not legal advice.