You've built a profitable business. The financials look good. EBITDA is strong. You're ready to take the company to market or bring in a strategic partner.
Then the diligence process begins, and suddenly there are questions you didn't anticipate. Questions about your leadership team. About key employee retention. About how decisions actually get made when you're not in the room.
These aren't casual inquiries. They're valuation discussions disguised as people questions.
I've watched deals lose momentum, multiples compress, and earnouts get structured into transactions because of people issues that could have been addressed months earlier. The frustrating part? Most of these issues are invisible to owners until a buyer points them out.
Here are five people issues that consistently impact valuations, and what you can do about them before they cost you.
What it looks like: The business runs because you run it. Major client relationships are yours. Critical decisions flow through you. Institutional knowledge lives in your head.
Why buyers care: They're not buying you. They're buying a business that can operate and grow without you. If you're the single point of failure, they're buying risk.
The valuation impact: Buyers will discount for transition risk, structure earnouts to keep you around longer, or walk away entirely if the dependency is too severe.
What to do: Start documenting processes, delegate decision-making, and build leadership capacity around you. If your exit timeline is 2-3 years out, begin transitioning client relationships now. The goal isn't to make yourself irrelevant; it's to prove the business doesn't collapse without you.
What it looks like: Your top performer knows how to handle the difficult client, but nobody else does. The production manager has the vendor relationships, but they're not written down. Systems and processes exist, but only in people's heads.
Why buyers care: Tribal knowledge walks out the door. If key employees leave post-transaction (and many do), critical capabilities leave with them.
The valuation impact: Buyers see execution risk. They'll either negotiate price downward or build extensive transition periods and retention packages into the deal structure.
What to do: Conduct a knowledge audit. Identify what only one or two people know how to do. Document it. Cross-train. Build redundancy in critical roles. This isn't just good for transactions; it's good for resilience.
What it looks like: You've been "managing" compensation informally. Maybe you've given raises based on loyalty rather than market rates. Maybe your top people are underpaid because you're bootstrapped. Maybe you're overpaying for mediocre performance because you don't want conflict.
Why buyers care: Underpaid employees leave. Overpaid employees create margin problems. Either way, there's a post-close correction coming that will be expensive and disruptive.
The valuation impact: Buyers will adjust for normalized compensation costs. If your best people are underpaid, expect retention bonuses to come out of your proceeds. If you're overpaying, expect workforce reductions or margin pressure post-close.
What to do: Benchmark compensation against market rates. Get honest about performance. Address gaps before diligence exposes them. If adjustments are needed, make them incrementally before you go to market.
What it looks like: Your CFO is really a controller. Your VP of Sales can manage the team you have but can't build the team you need. Your operations leader is a great executor but can't think strategically. They're good people, but they're at their ceiling.
Why buyers care: They're evaluating whether your leadership team can execute the next phase of growth. If the answer is no, they're pricing in the cost and risk of replacing them.
The valuation impact: Leadership gaps translate directly into integration risk and post-close costs. Buyers will either negotiate price to account for future hires, or they'll require you to solve it before closing.
What to do: Assess your leadership team objectively. Can they scale? If not, upgrade or augment before you enter the market. It's easier to address this when you control the timeline than when a buyer forces your hand.
What it looks like: High turnover in key roles. Siloed departments that don't communicate. A leadership team that doesn't trust each other. Employees who are disengaged or actively negative.
Why buyers care: Culture isn't soft. It's an operational reality. Dysfunctional culture means lower productivity, higher costs, and integration challenges that will take months or years to fix.
The valuation impact: Cultural issues create uncertainty. Buyers can't model it precisely, so they discount for it. They'll also assume key employees will leave post-close, requiring retention packages and replacement costs.
What to do: Get real feedback. Conduct stay interviews with your best people. Address dysfunction directly. If there are trust issues on your leadership team, fix them or make changes. Buyers will figure this out in diligence; better that you figure it out first.
Notice the pattern? All five of these issues stem from the same root cause: People.
Most owners spend months preparing their financials for a transaction. They get quality of earnings reports. They clean up the cap table. They optimize tax structure. All critical work.
But they don't apply the same rigor to their people strategy. They assume the leadership team is "good enough." They hope key employees will stick around. They wing it on culture.
That assumption is expensive.
When buyers evaluate your company, they're asking one fundamental question: Can this business continue to perform and grow after we own it?
The answer to that question lives in your people. Do you have the right leadership team? Can the business operate without you? Will key employees stay? Is the culture healthy enough to withstand change?
If the answer to any of those questions is unclear or unfavorable, it shows up in valuation. Every time.
Here's the good news: all five of these issues are solvable. But they take time.
You can't fix key person dependency in 90 days. You can't rebuild a leadership team during diligence. You can't document tribal knowledge the week before you go to market.
If you're thinking about a transaction in the next 12-24 months, the time to address these issues is now. Not when the LOI is signed. Not when diligence uncovers the gaps. Now.
Because the companies that get premium valuations aren't just the ones with strong financials. They're the ones where people are treated as the strategic asset they actually are.
Mya is the founder of Stone Capital Partners, where she helps business owners and investors prepare for and navigate transactions by addressing the people issues that impact value. Learn more at (website) or connect with her on LinkedIn.