> In reality, if you are depending on one employee to make your business that is a huge risk.
This is extremely common in many/most SMBs.
> That employee needs to document and transfer his knowledge and relationships out to the company at large.
Most employees who are rainmakers/linchpins like this are also aware that they are rainmakers/linchpins.
First, knowledge documentation and transfer in reality is hard. Very few people read docs, even when they are told to and those docs are critical to their job and the business as a whole. If you do it face-to-face, it’s almost always the case that the person learning politely listens and is already making a mental list of changes (often catastrophic) that they are going to make.
Second, relationships are extremely valuable, and anyone who has them pretty much knows this. Why would they give this up freely? Oh, you will fire them? I guess the company’s competitor would love to have your rainmaker and all of his/her contacts.
In all of the sustainable and stable businesses I have seen, these rainmakers/linchpins get paid outsized amounts of money due to the processes and connections that they have and have made. Imho, they deserve it.
The company has to have a BATNA in the event that the employee demands something outrageous, but usually the best course of action is to reward them generously for sustained profitable performance. If you are lucky and skilled as an executive/manager, some of these superstars will be happy with a slightly smaller (but still relatively large) income in order to work in what is hopefully a healthy work environment.
It would definitely be a good move to pay for additional hires at less than $500k unless they are writing their own $10m products; no disagreement there.
In reality, if you are depending on one employee to make your business that is a huge risk.
That employee needs to document and transfer his knowledge and relationships out to the company at large. You must raise the bus factor.