We have written before about the people who matter most in your company: key employees and skilled machinists (Deal Notes® 153 and 204). This note is about something broader than any one person: the places in your business where a single element, a person, a machine, a supplier, or a login, stands between you and a revenue line. The five-axis mill that runs your highest-margin part has one operator who knows its quirks; one quality manager handles every AS9100 audit. None of this shows up on a P&L. All of it shows up in due diligence.

Buyers think about risk as probability times consequence. A single point of failure has a low probability, but the consequence is not a bad quarter; it is the loss of whatever that point supports. When a buyer’s diligence team asks, “Who else can run this?” or “Who else does the customer call?”, they are mapping every place where one departure, one illness, or one breakdown takes revenue with it. Where the answer is “nobody,” the buyer discounts the price, moves value into an earnout or escrow, or conditions the deal on retention agreements you will pay for.

Single points compound. Suppose your largest customer (Deal Notes®12) is served under a contract managed by one person, produced on one machine run by one machinist, from material bought from one sole-source supplier (Deal Notes®11). That is one revenue line with four independent ways to disappear. Together, a buyer sees a business that works only when everything works.

The fix is redundancy, and it is cheaper than the discount. Introduce a second person into every key customer relationship well before a sale, so the buyer meets a team and not a name. Cross-train operators on critical equipment and write down setups and process sheets; knowledge that lives in one person’s head is not valuable to a buyer. Qualify a second source on sole-source inputs. Make sure certifications, customer portals, and system credentials belong to the company, not to an individual.

You cannot eliminate every single point of failure. But you can know where they are, and a seller who walks into diligence with a plan for each one has already answered the buyer’s hardest question. Buyers pay for confidence (Deal Notes®131), and nothing builds it faster than a company where no single thing is one phone call away from halting operations.

Have a great day.

Joseph Lakaj
Analyst