Owner-manager dependence: the discount nobody sees coming

Why this factor weighs more than the others

A buyer is buying future cash flows. Anything that threatens the continuity of those flows after the seller leaves mechanically reduces what they are prepared to pay.

In a company of twenty employees, the owner-manager often combines four roles: salesperson for the main accounts, technical reference, decision-maker on every exceptional question and guarantor of the banking relationship. None of these roles is documented. Each rests on years of personal relationships.

The day they leave, the buyer inherits an organisation whose codes, informal arrangements and reasons why a given customer accepts a given lead time they know nothing about. They learn on the job, and they pay for their mistakes.

That is why this factor weighs more than an average order book or a profitability slightly below the sector. Those can be corrected. The loss of a long-standing customer who left with the owner-manager cannot.

How a buyer measures it, in practice

The questions asked in the first meetings almost never address this subject directly. They get there by roundabout routes.

• "Who signs quotes above a given amount?" If the answer is "me, all of them", the dependence is established.
• "Your five main customers, who looks after them day to day?" The answer distinguishes a company relationship from a personal one.
• "How many weeks of holiday did you take last year?" The question seems harmless. It is decisive.
• "What happens if a machine breaks down on a Friday evening?" It tests whether an autonomous chain of decision exists.
• "Who knows the passwords, the supplier codes, the negotiated terms?" It tests how well the know-how is documented.

An experienced buyer gets their answer in a one-hour visit, often before even reading the accounts. The team's attitude during that visit says more than any document.

What it really costs

Dependence does not only translate into a lower multiple. It ripples through the entire structure of the transaction.

This last point is the most underestimated. A company too dependent on its owner-manager loses access to a whole category of buyers, which reduces competition and therefore the price, independently of any explicit discount.

Reducing dependence in eighteen months

There is a simple and honest test to measure your own situation. Go away for three weeks without being reachable: no phone, no messages in the evening, no remote sign-offs.

Then look at four things on your return: the number of decisions waiting for you, the number of customers who asked to speak to you personally, the mistakes made and their real cost, and the state of the team. The result is rarely comfortable. It has the merit of being accurate, and it gives you the precise list of work to be done.

The order matters as much as the content. Starting with the documentation of procedures is the classic mistake, because it is the most visible part and the least decisive.

Months 1 to 6, customers. This is the priority piece of work. Introduce a second contact on every important account, present at meetings, copied on exchanges, able to handle a complaint alone. The six-month objective is that no customer says "I work with you" while addressing you personally.

Months 4 to 12, decision-making. Set written delegation thresholds, by amount and by nature. Hold a weekly management committee where trade-offs are decided collectively. Accept that some decisions will be worse than yours: that is the price of learning and it remains far below the cost of the discount.

Months 6 to 18, technical knowledge. Document what exists only in your head: production parameters, tricks of the trade, terms negotiated with suppliers, incident history. An imperfect binder is worth infinitely more than an unshared memory.

Months 12 to 18, structure. Recruit or promote an operations director. It is a real cost, in the order of €70,000 to €100,000 a year including social charges, which weighs on EBITDA. And it is a profitable investment: a position that costs €80,000 and removes a discount of one turn of EBITDA on a company with €700,000 of EBITDA pays for itself almost nine times over.

What cannot be delegated, and how to present it

In some companies, the dependence is structural. A consulting firm built on the founder's personal reputation, a master craftsman, a laboratory whose intellectual property rests on one person: delegating it would amount to changing the company.

In those cases, the right strategy is not to deny the subject but to structure it. A long handover formalised in a contract, a solid non-compete clause, a portfolio transfer organised over three years, an earn-out that rewards the success of the handover rather than financial performance alone.

A seller who addresses their own indispensability frankly and proposes a credible plan to deal with it obtains better terms than a seller who plays it down. Buyers know how to read this situation. What they punish most severely is late discovery.