The process-and-dependency layer of operational DD addresses the human and procedural fragility most agencies carry. The technology layer answers "can the systems support post-close operations?"; the process layer answers "can the people and procedures?". Two workstreams structure the diligence: key-person risk and workflow productivity benchmarking.
The vacation test, continuity diagnosis.
Most agencies have at least one key person whose departure would materially disrupt operations. The diligence identifies them and quantifies the risk.
The vacation test is the practical first-pass diagnostic. When the owner took two weeks off last year (assuming they did), what happened? Three patterns emerge.
- Healthy delegation. Operations continued normally. Decisions were made by deputies. Client questions were handled without owner involvement. New business closed in the owner's absence. This is the pattern of an agency that can absorb owner transition without operational disruption.
- Wait-state operations. Routine work continued but non-routine decisions were deferred. Producers held client questions for the owner's return. New business slowed. Carrier relationships went stale. This is the most common pattern in owner-operator agencies — and the largest post-close risk.
- Operational degradation. Even routine work stalled. CSRs couldn't handle escalations. Errors increased. Clients noticed the owner's absence. This pattern indicates the owner is the operating system; the buyer is acquiring a brand and a book but not an operating business.
Beyond the owner, similar diagnostics apply to other potential key persons: the top producer (does their book transfer or follow them?), the lead CSR (is there a backup who can handle the same workload?), the controller or office manager (does anyone else know how the financials flow?).
The vacation test catches what the org chart hides. A two-week absence reveals operating dependencies that years of normal operations conceal.
Revenue per FTE, processing throughput, error rates.
The second workstream benchmarks the agency's workflow productivity against industry norms. The numbers reveal whether the agency operates efficiently — which is sometimes a quality signal and sometimes a fragility signal — or whether it relies on heroics that won't transfer post-close.
The benchmark panel covers:
Per-person throughput.
- Revenue per FTE ($140K–$200K typical).
- Policies per producer ($400K–$700K book typical).
- CSR-to-producer ratio (1:1 to 1:3 typical).
- Active policies per CSR (200–400 typical).
Output integrity.
- Policy-error rates.
- Carrier-pushback frequency.
- Premium-reconciliation accuracy.
- Endorsement turnaround time.
Process robustness.
- Documented procedures vs. tribal knowledge.
- Cross-training depth.
- Vacation coverage capability.
- Onboarding-time for new producers and CSRs.
Interpretation matters. An agency at $250K revenue per FTE with documented procedures and cross-training depth is genuinely efficient — the buyer can preserve the model. An agency at $250K revenue per FTE with no procedures and zero cross-training is heroics-dependent — the productivity number reflects current people's effort, not transferable operational capability. Same number; different post-close trajectory.
The diligence reviews both the numbers and the substrate that produces them. The buyer's questions probe how the work actually gets done — process discipline, knowledge documentation, role redundancy. The seller's representations are baseline; the buyer's observation during diligence visits is verification.
The process-and-dependency layer feeds the post-close integration planning. Key-person findings inform retention bonus targeting and integration sequencing; workflow findings inform process-integration decisions and CSR-team structuring. The Pillar — Operational Due Diligence — covers the broader framework. The integration cluster — Seven Operational Pillars — covers the post-close execution.