Value Driver Series #2 – The Switzerland Structure

The second value driver we are going to address in in our Value Driver Series is referred to as “The Switzerland Structure”.

You probably know that Switzerland is neutral and independent, but did you know that you should operate your business like Switzerland?  Like Switzerland, your business should not be dependent on any outside forces.  In particular, your business should not be dependent on any one customer, any one employee or any one supplier or vendor.

Think about it.

If you rely too heavily on one employee to handle your most important tasks, what happens when that employee decides to leave?  You are in the lurch and need to find someone to fill that employee’s shoes ASAP.  The same thing happens if you are too reliant on one customer or one supplier or vendor.

If that one customer stops purchasing from your company, revenue will plunge.

If that one supplier or vendor is stops production or is unable to deliver orders in a timely fashion, your company may be left without a source for a key component to a product that it manufactures.

From a valuation perspective, being overly dependent is risky.  A potential purchaser will immediately understand the threat to the business and discount the purchase price.  You can reduce the risk by diversifying your customer base, your key employees, and your list of suppliers and vendors.  No one customer, employee or supplier should be responsible for more than 15% of your company’s revenues.

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This blog article is for informational purposes only.  It does not create an attorney-client relationship and is not intended to be regarded as legal advice.