Quick answer
When a small business suddenly loses a key person, look after the people first, then secure passwords, customer relationships and jobs in progress. Work out which revenue depends on that person, cover the role with contractors or temporary staff, and check any key person insurance. Recruiting and covering a role costs money before it earns it, so forecast 13 weeks and fund the gap with working capital sized to your trade.
Key points
- People first — the team is often shaken too.
- Secure logins, supplier accounts and customer contacts the person held.
- Contractors and labour hire can protect revenue while you recruit.
- Key person insurance, if you have it, may pay out — check the policy.
- Employer guidance
- business.gov.au · employees
- Free counselling
- Small Business Debt Helpline 1800 413 828
- Unsecured options
- Typically $5,000 to $500,000
- Purpose
- Business purposes only
In a small business, one person can carry an enormous amount: the estimator who prices every job, the head chef everyone comes for, the only licensed electrician, the office manager who knows every password and every customer’s quirks. When that person leaves suddenly — resigns, falls seriously ill, has an accident or passes away — the business can wobble quickly.
It’s a crisis that rarely gets talked about in finance terms, but it’s real. This page walks through how to steady things. You’ll find it as “Loss of key staff” in our emergency action checklist.
What should you do in the first 24 hours?
- Look after people. If someone has died or been hurt, your team will be affected. Give them information and space. Lifeline (13 11 14) and Beyond Blue (1300 224 636) are there for anyone who needs them.
- Secure access. Change or recover passwords for email, banking, accounting, supplier portals and social media the person used.
- Find the jobs in progress. What were they working on, what’s due, what was promised?
- Tell the rest of the team what’s happening and who’s covering what this week.
What needs doing in the first week?
- Call key customers the person looked after. Introduce the new contact and confirm deadlines.
- List what only they knew — pricing methods, supplier contacts, processes — and write down what you can recover.
- Arrange cover. Contractors, labour hire, a retired industry contact or a temporary promotion. It’s usually more expensive per hour but protects revenue.
- Check your insurance. If you have key person cover, lodge a claim. If the person was injured at work, workers compensation processes apply.
- Check licensing requirements. If they were your nominee or qualified supervisor, contact the licensing body.
- Start recruiting — and budget for the weeks before a new person is fully productive.
Who should you call?
| Contact | Why |
|---|---|
| Your team | Reassurance, cover arrangements |
| Key customers | Continuity, new contact person |
| IT provider | Access and passwords |
| Insurance adviser | Key person, workers compensation, business interruption |
| Licensing body | Nominee or supervisor requirements |
| Recruitment or labour hire | Cover and replacement |
| Small Business Debt Helpline — 1800 413 828 | Free financial counselling if cash gets tight |
How much does losing a key person really cost?
Owners often underestimate this because the costs are spread out:
| Cost | Typical timing |
|---|---|
| Contractor or labour-hire premium | Immediately, for weeks or months |
| Lost or delayed sales | Immediately, easing over time |
| Recruitment | Weeks 2 to 8 |
| Training and ramp-up | Months 2 to 6 |
| Mistakes while others learn the role | Scattered |
Putting even rough numbers against each line tells you whether you can carry it from cash, or whether you need help. If it looks tight, a short enquiry gets a real person looking at your situation — and enquiring doesn’t touch your credit file.
How do businesses fund the gap after losing key staff?
- Unsecured cash-flow funding — typically $5,000 to $500,000 sized on turnover and bank statements, to cover contractors, recruitment and a temporary dip in sales. See unsecured emergency cash.
- Line of credit — useful when you’re not sure how long cover will be needed.
- Property-secured loan — for larger or longer transitions, from $20,000 to $5,000,000.
- Wages support — see paying staff through a crisis.
Illustrative example only: a commercial cleaning company’s operations manager leaves suddenly, taking a lot of know-how with them. The owner hires a contract manager for three months while recruiting, and uses a small unsecured facility to cover the overlap so contracts aren’t put at risk.
How can you reduce key-person risk next time?
- Document the core processes each person runs — even a two-page manual helps.
- Share passwords through a business password manager, not one person’s head.
- Make sure more than one person knows each major customer.
- Cross-train on critical tasks.
- Consider key person insurance for roles that drive revenue.
Our one-page business continuity plan includes a people section.
What mistakes make the transition harder?
- Doing the role yourself as well as your own. Owners who try to cover everything burn out and let other things slip.
- Hiring the first applicant under pressure. A contractor for a few weeks can buy time to choose well.
- Leaving customers to hear it second-hand. A personal call is worth far more than an email later.
- Skipping the handover audit. Passwords, supplier accounts and half-finished quotes are easy to lose.
- Ignoring your own wellbeing. Support such as NewAccess for Small Business Owners from Beyond Blue offers free one-on-one coaching for business owners under stress.
Where can you get free help?
business.gov.au’s employee pages cover pay, leave and ending employment, and point employers to free workplace advice. For your own wellbeing, NewAccess for Small Business Owners from Beyond Blue offers free one-on-one coaching, and the Small Business Debt Helpline can help if the transition is squeezing cash.
What documents should you keep?
- A list of roles, responsibilities and customers the person held
- Employment records and final pay calculations
- Insurance policies and any claim correspondence
- Contractor and recruitment agreements
- Bank statements and management accounts
Need breathing room while you rebuild the team?
Covering a key role costs money before it earns any. If the transition is squeezing cash, we can help you plan for it.
Looking at options carries no downside: we don’t check credit at the enquiry stage. We don’t farm out enquiries — one team holds your file from start to finish. The person who rings you back will have read what you wrote and will want the full story.
Please take a moment to get the amount, purpose, state and property details right; a well-filled form is the quickest route to a useful answer. See if you qualify.
Frequently asked questions
What is key person insurance?
It's a policy a business takes out on someone whose loss would seriously affect revenue, such as an owner or top salesperson. It can pay a lump sum if that person dies or is seriously ill or injured, depending on the policy. Talk to an insurance adviser about whether it suits you.
How do I protect customer relationships when a key person leaves?
Call the most important customers yourself, introduce who will look after them, and follow up in writing. Customers mostly want reassurance that their work is in hand.
Can I get funding to cover recruitment and contractor costs?
Yes. Unsecured cash-flow funding is sized on turnover and bank statements and can cover recruitment, contractors and a dip in sales while you rebuild. Larger needs can be property-secured.
What if the person who left held our licence or accreditation?
Some trades and industries require a licensed nominee or qualified supervisor. Contact the relevant licensing body promptly to understand your obligations and timeframes.
What are my obligations to the departing employee?
Final pay, leave entitlements and notice depend on the employment arrangement and award. The Fair Work Ombudsman's website and business.gov.au's employee guidance are the places to check.