Value Builder Factor 3 – Independence (Switzerland Structure)
A Lesson From the World’s Richest People
What strategies can you learn about running your business from Switzerland?
Exclusive: People shopping at the famous Bahnhofstrasse in Zurich. The street is the third most expensive for retail property in Europe, and the fifth most expensive in the world. IMAGE:
One of the most fascinating elements of Switzerland’s success is its determination to remain neutral under unimaginable pressure to pick sides. The country has not declared a state of war since 1847 (it never entered the World Wars or the Iraq war) and opted out of joining the European Union. They didn’t even join the United Nations until 2002 and that was only after a country wide referendum.
Despite what you may think of Switzerland’s neutral geopolitical stance, it is hard to argue with the economic results of neutrality:
• The World Economic Forum’s Global Competitiveness Report currently ranks Switzerland’s economy as the most competitive in the world.
• In 2010, the Global Wealth Report by Credit Suisse Research Institute found that Switzerland has the highest average wealth per adult at $372,692, with wealth defined by the value of financial and nonfinancial (such as real estate) assets.
• According to Trading Economics, the worst the Swiss unemployment rate ever got during the recent worldwide financial crisis was 4.2 percent in January 2010; today the unemployment rate is around 3.4 percent.
• According to Mercer Consulting, in 2010, Zurich and Geneva were respectively ranked as the cities with the second- and third-highest quality of life in the world (behind Vienna).
The Switzerland Structure
The Swiss obsession with neutrality inspired the name of one of my core ideas for creating a valuable company. “The Switzerland Structure” is a way of evaluating your business to ensure that neutrality allows you to minimize your dependence on any one company or individual. I’d recommend you consider the Switzerland Structure in all areas of your business:
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 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.
If you’re too reliant on any one employee, you are at a significant risk if that employee chooses to leave and at a disadvantage when it comes to negotiating his or her salary. To avoid this situation, nurture a pool of people you want to hire. Toronto-based executive search firm IQ Partners offers a bench-building service: it proactively recruits a short list of candidates who could fill your key roles so that you have a bench of people to go to in the event of an employee defection.
If you’re too dependent on any one customer, your business will be highly unstable. It will be stressful to run in the short term and virtually worthless if you ever want to sell it. Try to work your customer concentration down to a point where your largest customer represents no more than 15 percent of your revenue. You’ll sleep better at night and have a more valuable company when it comes time to sell.
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Links to the 8 Factors Series:
- The valuation technique used by professional business buyers;
- The three attributes of a scalable business model;
- How to bulletproof your business from demanding employees, overbearing customers, and suppliers who hold you hostage;
- One simple technique for eliminating cash flow worries;
- The one kind of revenue that can triple the value of your business;
- The two essential elements of your marketing plan you need in order to avoid commoditisation and costly price wars;
- The one question you need to ask your customers to predict the likelihood that they will buy again in the future and refer you to others.
- Are you working IN or ON your business
Business Doctors is a business support network dedicated to helping small and medium sized businesses achieve their vision. We are experienced business people, passionate about sharing our skills and experiences. Our aim is to offer hands-on support, dedicated to getting you back on track to growing a profitable and more valuable business.
The Value builder score is an easy way to instantly see how well you are performing against the 8 Factors that drive value in your business. Business Doctors are certified Value Builders combining elements of the system created BY JOHN WARRILLOW with 10 years of hands on experience in helping businesses grow.
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