How Your Moat Impacts the Value of Your Business

What makes you tough to compete with?

It’s that thing that customers value but competitors can’t seem to match.

For Tesla, it’s their massive network of charging stations. Electric cars need to be recharged, and if you travel long distances, you need to know where you can get juice. Tesla’s network of super-fast charging stations not only makes driving their cars convenient but also makes Tesla difficult for other electric car companies to compete with.

You can’t just flip a switch and build 25,000 charging stations. First, you need the capital; then you need to find the land, negotiate its use, manufacture the chargers, and have them installed.

The length of time it would take another electric car company to match the supercharging network is what makes it a great moat for Tesla.

At The Value Builder System™, we refer to your moat as having Monopoly Control, and it can make your company a whole lot more valuable.

How Boondockers Welcome Built a Moat

Let’s look at the example of Boondockers Welcome, founded by Marianne Edwards and her daughter, Anna Maste.

You can think of Boondockers Welcome as a kind of Airbnb for RVers. People who like traveling by RV can search Boondockers Welcome for a list of hosts who are willing to let RVers stay on their land for free. RVers got a free strip of land to park their rig for the night, and the host gets a chance to meet a steady stream of interesting people who share their love for the great outdoors.

As with any two-sided market, the challenge is to quickly grow both sides of the market. Here Edwards and Maste had an advantage that was difficult to match. Edwards had spent years writing travel guides for adventure seekers and had a list of people who would make great hosts.

She sent a letter to her readers and quickly seeded the site with hosts. The Boondockers Welcome network of hosts had ballooned to more than 3,500 locations across the country when Harvest Host reached out to Maste and Edwards. Harvest Host is a membership for RVers that provides RV camping at wineries, breweries, distilleries, farms, museums, and other unique locations.

Joel Holland, the CEO of Harvest Host, reached out to them to gauge their interest in a partnership. At first, Maste and Edwards declined, but Holland, seeing the obvious synergies, persisted, asking the mother and daughter duo to name their number.

Maste and Edwards considered their dream number and doubled it. After some back and forth, Holland agreed, and due diligence began.

Diligence is where a lot of M&A deals fall apart because the acquirer realizes things are not as good as they seem. However, in the case of Boondockers Welcome, Harvest Host found exactly the opposite. They surveyed hosts and discovered a group of enthusiastic hosts extremely loyal to the Boondockers Welcome brand.

The deal closed weeks later.

Your moat may make your company attractive to customers, but it also makes your business more valuable. Focus on widening and hardening your moat, and watch the value of your business go up in lockstep.

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