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Want to Jack Up Your Company’s Value? Think Like Warren Buffett

March 31, 2021 | By John Warrillow

Warren Buffett is famous for investing in companies with a competitive “moat” around them. Buffett defines a moat as something that makes your business challenging to compete against and impossible to copy. Buffett argues that your moat allows you to avoid price comparisons, which enables better margins. More profit allows a company to invest in their moat, enabling them to pull even further away from their competition.

A well-differentiated brand can give you a competitive moat because your marketing makes your business unique from its competitors. When customers prefer your brand, it makes you tough to compete against. The problem with creating your moat based on a brand is that it can be fragile. If a competitive brand starts to draw the eye of customers, your company can become commoditized quickly. Likewise, if a setback tarnishes your brand, it can destroy your moat.

An innovative product or service can also make your company hard to compete against. Still, the key to ensuring a moat based on a product or process is durable is to legally protect your product or unique process for serving your customers.

To illustrate how protecting your intellectual property (IP) makes your business more valuable, let’s look at a start-up called ShipperBee.

The best way to think about ShipperBee is to imagine an Uber for your packages. Instead of calling a courier company, a business schedules a pickup with ShipperBee, and it dispatches someone from its network of independent drivers to pick up your package. Those drivers use an innovative system of lockers that ShipperBee calls “hives” to get your package to its destination with a lower carbon footprint than the traditional courier companies.

I recently interviewed ShipperBee’s founder, Jim Estill on Built to Sell Radio. Estill told me that he invested $5 million of his own money and quickly raised another $25 million from friends and family. Over three years, he grew ShipperBee to 150 full-time employees before he caught Torstar’s attention late last year. Torstar is a $500 million media conglomerate and owns hundreds of small newspapers across Canada, many of which are still printed and delivered. As digital editions replace physical newspapers, Torstar’s delivery personnel now have time on their hands. Torstar figured by acquiring ShipperBee, they could give their drivers more to do, enabling Torstar to retain as many drivers as possible through the slow sunsetting of traditional newspapers.

Now you may be wondering why a company the size of Torstar wouldn’t just take Estill’s idea and do it themselves. That’s where Estill’s multi-million dollar investment into patents came in handy. Estill had patented many elements of the ShipperBee model, making it difficult — perhaps even illegal — for Torstar to set up shop as a competitor. Instead, Torstar decided to acquire ShipperBee in 2021 (terms were not disclosed).

To maximize your company’s value, invest in your competitive moat. It could be a differentiated brand, a unique product, or a groundbreaking way you do business that you’ve protected through a patent. At The Value Builder System™, we call it having “Monopoly Control,” and it’s one of the eight factors that drive the value of your company.

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