Have You Built The “Switzerland Structure” Into Your Business?
The value of a business can be negatively affected when it is too reliant on any one customer, employee or supplier. The Switzerland Structure is based on Switzerland’s focus on neutrality. The country has not declared a state of war since 1847 and it never entered the World Wars or the Iraq war. It opted out of joining the European Union and entered the United Nations only after a country wide referendum.
Switzerland’s neutrality allows it to not depend on any one country for its success. A business that is not handcuffed by any one customer, employee or supplier can enjoy the same level of freedom and enhance its business value because it provides reduced risk to a potential buyer.
Let’s take a quick look on how being too dependent on one customer, supplier or employee can affect the value of your business.
Your business can be highly unstable if any one customer starts to represent more than 15% of your revenue. It actually starts to become a risk when one customer represents 5% of revenue. Focus on building your customer base so you become less reliant on one customer. You will have a more valuable business and sleep better at night.
Being dependent on only one or two suppliers can represent a significant risk. Consider pricing and product availability. The lack of competition for your business and dependence on their supply chain can put you at their mercy. The more you can spread your business around the more control you have resulting in a higher business value.
Do you have a key employee that could devastate your business if he/she left your company? They might possess key technical or industry knowledge or customer relationships. I personally witnessed a profitable computer service company unravel and eventually sell for a pittance. The key technical employee left to start his own business and took key customers with him. Try to create a team concept and contingency plan where a number of people can step in when a key employee leaves.
The Switzerland Structure is overlooked by many business owners. It can have a dramatic effect not only on business value but the long term viability of a company. To find out your company’s score on the Switzerland Structure and the seven other business value drivers go to www.empoweredbusiness.ca to get your free Value Builder Score.