8 Key Drivers Of Company Value (Series) – 3. Switzerland Structure
This series of articles follows on from an article I published recently, titled “8 Key Drivers Of Company Value That Every Business Owner Should Know”, where I mentioned that I use the Value Builder System™️ to help small business owners grow the overall value of their companies, by focusing on 8 Key Drivers that impact company value.
At the heart of this system is the Value Builder Score, which determines how well a business is performing in each of those 8 key areas. This series of articles provides some deeper insight into each driver with tips on how to improve in those areas.
But ultimately, what makes this important? It’s every business owners dream to be rewarded for all the hard work they put in over the years when they finally decide to exit, so they get to enjoy a long and happy retirement without financial worries.
So, knowing about these drivers and how to improve them, puts business owners on a path to maximizing the value of their companies while giving them the peace of mind to know that they are growing an asset of value before they exit.
Today we’ll look at Switzerland Structure, which looks at how dependent the business is on any one employee, customer or supplier.
This is how John Warrillow, the founder of the Value Builder System, explains it:
“The Switzerland Structure gets its name from the country of Switzerland. So if you know anything about the history of Switzerland, it’s pretty amazing. They’ve taken this obsession with being independent.
They didn’t join either of the two World Wars, they didn’t send troops to Iraq, they didn’t even join the United Nations, if you believe this, before a referendum for the entire country to decide whether to join or not. They ultimately did, but it really goes to the idea that, as a country, they’re obsessed with this independence, not being overly dependent on any one faction or regime, so to speak.
That’s essential for building a sellable company, that independence of any one constituency. And the three most important groups you’ve got to make sure you are independent of are, number one, customers. So you can’t have an overly concentrated customer set. You’ve got to have good diversification among your customer set. Number two, employees. So you can’t be overly reliant on any one employee. And number three, and this one’s obviously not sometimes as intuitive as the others, you can’t be overly dependent on any one supplier either.
So customer, employee, supplier, you’ve got to be independent of those three. Because for a buyer coming in, they’re going to look at your business, and if they see that you’re overly dependent on any one of those constituencies, they’re going to discount the business because it’s just too risky for them.
So to improve your score, you’ve really got to make sure you’ve got good diversification in your customers, make sure you’re not overly reliant on any one employee, and you’ve got diversification in your suppliers as well.”
John also delves a little deeper into this topic on his “Built to Sell Radio” podcast:
“In this episode, Peter Kelly describes how his company OPENLANE had the majority of its revenue from only five customers, a few of which who were thinking about building a competing product in-house.”
Listen in as he discusses how he dealt with this risk and found a buyer that would help him corner the market.
So if you’re a business owner who’s planning ahead and considering ways to exit your business on your terms, I hope the information I provide in these articles will help you reach those goals.
If you would like to chat to me about this in person, feel free to book a slot in my calendar and we can discuss it further.
If you want to see how you score in each of the “8 Key Drivers” right now, take 15-minutes to complete this survey and you’ll get a comprehensive 25+ page report benchmarking your business against its peers, plus 49 tips on how to improve those 8 key areas.