The Switzerland Structure
The Swiss make amazing chocolate, beautiful watches, and they can also teach us a lot about making a business more valuable.
The Swiss have a reputation for remaining neutral. They didn’t officially join either world war. They didn’t join the rest of Europe when the continent moved to a single currency, and they didn’t even join the United Nations, the world’s international peacekeeping organisation, until the entire country voted on it.
Yes, the Swiss are obsessed with independence, and when it comes to running your company, you should be too. When your company becomes too reliant on something or someone you don’t control, acquirers will consider that to be a risk factor, and discount the value of your business.
By contrast, the most valuable businesses reduce their reliance on:
Suppliers: How easy would it be to replace your most important external supplier? If your business is dependent on one or two key suppliers (companies or independent consultants), you are at their mercy. Cultivating a bench of suppliers, on the other hand, means that you will never feel beholden to anyone. Spread your business around—even if you lose some special pricing discounts. Neutrality is worth more than a few dollars in savings.
Employees: How easy would it be to replace your most important sales & marketing employee? How about the person in charge of making your product or delivering your service? If you’re too reliant on any one employee, you are at significant risk if that employee chooses to leave and at a disadvantage when it comes to negotiating his or her salary.
Customers: What percentage of your overall revenue did your largest customer represent last year? If you’re too dependent on any one customer, your business will be highly unstable. Try to work your customer concentration down to a point where your largest customer represents no more than 15% of your revenue. You’ll sleep better at night, and have a more valuable company when it comes time to sell.
The Switzerland Structure is one of eight drivers of your company’s value. Get your score on all eight by completing your Value Builder Questionnaire.