Many businesses are highly dependent on a few key people.
The individual who started the company, for example, may be the force behind its success. One of the more difficult risks to evaluate when determining a business s value is the effect of losing a key person. A strong management team clearly can be an asset that enhances a company s value. Conversely, the lack of a successor to a key employee or owner can be the end of a once-profitable enterprise. Dependence on a key individual may result in an increased capitalization rate for valuation purposes.