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 organization until the entire country voted on it.
Yes, the Swiss are obsessed with independence, and when it comes to running your company, you can 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.
In fact, it's one of the areas we see business owners frequently struggle with. Your business needs to be "neutral" when it comes to dependence on 3 relationships, which we refer to as “Switzerland Structure”. Watch the video to find out why 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 and 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 can 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.
Switzerland Structure is one of eight factors that drive the value of your company. Want to find out how you score on all eight?
If that's a “yes”, then let's find a time to chat about the Value Builder System Assessment and building value in your company. A 30-minute slot is waiting for you. Click the button below to find one that works for you.
Julie Edge Ph.D., is chief strategist and founder of Inside Edge Solutions LLC, a boutique strategy coaching and consulting firm serving business owners seeking less chaos and complication in their business and more thriving in their life—both personally and professionally. Connect with Julie on LinkedIn at @drjulieedge