Have you ever wondered what would happen to your business if you could not work for an extended period of time, or a key employee left the company? Would your business survive?
You can use the Switzerland Structure to ensure that never happens.
John Warrillow (Built to Sell: Creating a Business That Can Thrive Without You) mentioned this at a recent conference I attended and it got me thinking right away – where the hell is he going with this and what does it have to do with selling a business?
It turns out it has everything to do with creating a system to ensure your business can operate without you, even in the event that you sell it.
The Switzerland Structure:
When starting, building, creating or growing a business you need to ensure it is not dependent on any of the following:
- 1 key employee
- 1 key manager
- 1 key supplier
- 1 key customer
- 1 key vendor
I even would go as far as ensuring the business is not dependent on the owner.
My father had a very successful CPA firm back in the day and I use to remember clients always wanting to talk with him (the founder of the firm) and none of the other partners.
Granted, accountants and their clients can have a way more personal relationship than other sectors and services, however, it still presented a problem.
The problem was that clients had a close tie to 1 person, not the company, therefore, if my father was sick, on vacation or decided to retire…the firm would suffer. This direct correlation can be extremely dangerous in business especially if you are looking to sell it one day.
The Switzerland Structure is the way you need to structure your business especially if you want to maximum the value and amount of money you can sell your business for in the future.
A potential buyer wants to know that the business is not attached to 1 vital variable that can send the business in a downward spiral.
As a seller (one day) you need to be able to demonstrate growth potential, customer’s satisfaction, recurring revenue and a business that is independent – just like Switzerland.
In summary, this is what “The Switzerland Structure” looks like in a formula. It’s very simple, however, can be difficult to implement and wrap your head around:
LESS DEPENDENCY IN BUSINESS OPERATIONS =
HIGHER SELLING PRICE & EXIT OPTIONS