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Is This Hidden Factor Driving Down the Value of Your Business?

May 10, 2021 | By John Warrillow

An Airbus A380 is a huge plane capable of flying up to 853 passengers from Houston to Dubai. It has four massive engines yet, amazingly, could stay in the air if three of the four were to fail. That’s the kind of redundancy you want if you’re one of the 853 souls who depend on the A380’s airworthiness for your survival.

In the same way an A380 needs a backup plan in case an engine fails, the most valuable businesses also have a built-in Plan B for their critical functions. None of those functions are more important than your sales and marketing engine.

Most companies have a reliable marketing channel for new leads, yet if you’re too reliant on one source, the value of your business could suffer. The most valuable businesses have a high score on something we refer to as the Switzerland Structure over at The Value Builder System™. The Switzerland Structure measures your dependency on a single customer, employee, or supplier. Your marketing channels are considered suppliers, and if you are dependent on just one, expect to take a hit on your Switzerland Structure score and — by extension — the value of your business.

The Ultimate Dealbreaker

James Prebble co-founded Palladium Digital, a consultancy helping private equity groups get a return on their investments. One of the ways private equity groups leverage Palladium is to perform “digital due diligence” before they invest.

During a recent Built to Sell Radio episode, Prebble revealed that one of the things Palladium evaluates for their private equity clients is an acquisition candidate’s dependency on a single marketing channel.

If Palladium discovers that a company being considered for an investment is too dependent on a single marketing channel, it can often lead Prebble and his colleagues at Palladium to recommend against consummating the transaction.

Want to improve your score on the Switzerland Structure? Consider how many engines you have for generating new leads. If you get a lot of your traffic from organic search, consider what would happen if Google were to tweak its algorithm. If you’re reliant on pay-per-click advertising, consider what would happen if a giant came along and started outbidding you on your favorite search terms.

Your goal should be to have multiple lead-generating engines so that if one were to be compromised, just like the A380, you’ve got a number of backup engines to rely on.