ALL the Fallout: What Happens When a Key Person Leaves Your Business

I've heard a lot of "chatter" this past month regarding "fractional executives."

They are all the rage these days.

And not in a good way.

Fractional executives are necessary when a key leader leaves a company and there is no one who is capable of replacing them.

Is that a risk you want to take?

It surely means you (the business owner) are not in the driver's seat.

More often than not, running an independent business means relying heavily on a few key people. But what happens when one of them leaves?

Whether they resign, retire, or become unavailable unexpectedly, the ripple effects can be serious. For many businesses, losing a key employee isn’t just inconvenient—it’s a real threat.

Here are just a few of the risks off the top of my head....

1. No One Else Knows What They Did
If a key person leaves and takes all their knowledge with them, your business can hit a wall fast. Maybe they handled the books, managed operations, or had deep relationships with customers or vendors. If their role isn’t documented or shared, you're left scrambling.

2. You Might Lose a Key Customer
Some customers stick with your business because of the relationship they have with that person. If they leave—and especially if they go to a competitor—that customer might follow them. It's not just a lost relationship - it's lost revenue.

3. Operational Bottlenecks
When one person is the only one who knows how something works— a system, a supplier process, or a critical workflow—they become a bottleneck. Once they’re gone, that knowledge gap can slow down or stop operations entirely.

True Story: A few years ago, I was working with a senior leadership team of nine. As I got to know their roles and responsibilities better, I realized there was one guy who was a huge bottleneck. He was great at what he did and had been doing it for almost two decades; everybody left him alone and nobody could really explain what he did. I realized that he commanded so much of the operation (which meant he commanded a lot of the revenue!) that if he got hit by the proverbial bus tomorrow, that company would have had to downsize immediately. He was one of leadership team of nine, but truly, he kept the operation running.

4. Loss of Institutional Knowledge
Every small business runs on a mix of formal systems and informal know-how. That includes client quirks, vendor tricks, and workarounds that never got written down. When a key person leaves, so does all that off-the-books knowledge.

True Story: I have a fellow consultant friend who does what I do - but with buildings. Huh? Let me explain: Right around the time that I realized companies were losing a lot of leadership capabilities, he realized that the facilities managers and building engineers who were retiring were also taking a lot of knowledge about the building with them. When was this wall erected? What's behind it? When was the last time the furnace was replaced? What's its remaining life expectancy? Where are the sewer pipes? Does anybody know where the blueprints are for this building? etc., etc.
Pretty neat, huh? Your key people aren't always leaders in the company. See this video for more on key roles and key people.

5. Morale Takes a Hit
People talk. When someone important leaves, the rest of your team may wonder why. Was it burnout? A better offer? Trouble in the business? This uncertainty can lower morale—and might even lead others to start looking around.

True Story: Working with a small engineering firm last year, we consistently told the CEO that he had to make some kind of announcement regarding why we (consultants) were there. He scoffed that it was unnecessary - they were like family and would surely come to him if they had concerns. He changed his tune when a key division leader left just two months into our engagement, because he was going to a "safer" job with the state.

6. Overload on the Remaining Team
Their work doesn’t just disappear. It gets passed on to others who may already be stretched thin. That creates stress, leads to mistakes, and can cause more turnover if you're not careful.

7. Projects Get Delayed or Cancelled
If they were managing key projects or had specialized skills, progress slows. Deadlines get missed. Customers get frustrated. And recovery takes longer than you think. In the case of the company mentioned in #5, above, the company simply shut down the division. The employee who left was the only one who knew the direction of the division he was starting up.

8. Leadership Vacuum
Sometimes a key person doesn't have a "fancy" title. They’re the informal leader—the problem-solver, the motivator, the one people turn to. Losing them can disrupt team dynamics and create confusion about who’s in charge.

9. Cost of Replacement
Hiring isn’t cheap. You’ve got recruiting fees, lost time, onboarding, and training. And it can take months for a new hire to get up to speed. All of that affects your bottom line.

You can’t prevent people from leaving, but you can prepare for it:

• Document roles and processes. Start writing things down. Even a simple checklist or shared doc can go a long way.

• Cross-train your team. Make sure more than one person can handle each critical task.

• Build strong customer relationships across your team. Don’t let one person be the sole connection to key accounts.

• Have a succession plan. Think ahead about who might step in—and what they'd need to succeed.

Losing a key person doesn’t have to be a crisis—but only if you plan ahead.

This article was originally posted on LinkedIn.