Sometimes the toughest decisions occur when dealing with lonetime employees. I think you need to sit down with him and explain the reality of the situation. Hell my hunting dog is reliable but the day he quits producing and is afraid to jump in the water for that extra duck is the day I see my breeder.
Bottom line is point out his positives and be honest with him how you see things. he might not like what you have to say and feels he has helped you build the business, but keep in mind it was'nt his money he has been asking for.
Good luck keep us posted