Human capital
The combined skills, knowledge, experience, and capabilities of the people in an organisation. An intangible asset not carried on the balance sheet, it drives 80 to 90 percent of value creation in service and software businesses.
In practice
Dependence on key individuals is the primary human capital risk for SMEs. If the departure of one person significantly threatens the business, the organisation is fragile. The remedies are process documentation, developing second-line managers, and key-man insurance. For an acquirer in due diligence, an organisational chart where all decisions flow through the founder is a 15 to 30 percent price reduction factor.