This defnitely seems to be the way to go. Simply remove the ways his business has come to rely on you - whether he's aware of those ways or not. Additionally, use what you've learned about the business and the local market to maximize on the most profitable areas, and take adavantage of areas not being utilized.
My wife and I had a similar circumstance. About 10 years ago, she got a job at a dog walking/pet sitting company in our area. The woman who ran the company mistreated both clients and employees, and ran the business very poorly. After about a year, I convinced my wife to leave and setup her business utilizing all the things she learned about the business and the market. My wife was concerned because she signed a non-compete, but after doing some research, I found that, even if the woman had pursued it, most of the non-compete was legally unenforceable, anyways.
The woman was particularly stupid, as not only did she screw over my wife, which was the final straw, but I was also in the middle of developing a custom database for her company which kept track of client/employee info and handled scheduling functions. She wanted to do it piecemeal, so my original contract for work only covered a portion of the system. I had finished the initial work order, and simply didn't sign another with them in order to finish the work. So, she ended up paying me several grand and didn't have a completed system. When she called to ask when I would be available to meet to talk about finishing the system, I laughed out loud and hung up.
Anyway, a few years down the road, my wife's business was already far more profitable, efficient, and successful than the company she left - largely based off the lessons she learned while she was working there.