One of the eight factors that impact the value of your company is something the team at The
Value Builder System refers to as “The Switzerland Structure, ”which emphasizes the importance of business independence. It cautions against excessive reliance on any single
entity, whether suppliers, employees, or customers. While many business owners recognize the risks associated with dependency on a high-profile customer or employee, the hazards of anchoring to a single supplier are often overlooked.
Supplier dependency comes in many flavors, but the most pernicious is a dependency on a
single marketing supplier for sales leads, such as a dominant e-commerce site or social media
platform.
6 Ways Marketing Supplier Dependency Cuts Your Value
Amazon, for instance, is a prime example where businesses heavily invest to gain market access
and visibility. However, dependence on a single sales platform like Amazon can devalue a
business in the eyes of investors or acquirers for several reasons:
1. Increased Risk Exposure: Sole reliance on one platform exposes a business to risks of
sudden policy, fee, or algorithm changes. Such negative alterations by the platform
could significantly impact the business’s sales and profitability.
2. Lack of Diversification: Over-dependence on a single channel is perceived as a
vulnerability, while a diversified sales approach suggests resilience and adaptability,
appealing attributes to both investors and acquirers.
3. Limited Growth Potential: Exclusive reliance on one platform can restrict a company’s
growth opportunities. Investors typically favor businesses with multiple channels for
growth. Being bound to one platform can limit a business’s potential for expansion.
4. Brand and Customer Relationship Limitations: Operating primarily through a third-
party platform may lead to limited customer interaction, hindering the development of
a strong brand identity and customer loyalty, both highly valued by investors.
5. Negotiating Power and Autonomy: Dependence on a platform like Amazon can reduce
control over crucial business aspects, such as pricing and customer service. Investors
may view this lack of autonomy as a strategic weakness.
6. Perception of Innovation and Independence: Businesses demonstrating innovation and
independence are often more attractive to investors. Over-reliance on a single platform can create an impression of a lack of these qualities.
How Chad Maghielse Improved His Score on the Switzerland Structure
Chad Maghielse’s company, Pets Are Kids Too, originated with a simple spray to help improve
his dog’s breath and swiftly expanded to over $2 million in sales with a 35% profit margin within
three years, relying solely on Amazon. Recognizing the risks of this dependence on the e-
commerce giant, Maghielse embarked on a path of supplier diversification.
Maghielse expanded to another e-commerce platform, Chewy.com, and launched his own
online store. This strategy reduced Amazon’s share of his sales to 65%, while Chewy and his
store contributed 30% and 5%, respectively. A significant reduction in his business’s platform
risk and an increase in its appeal to potential buyers resulted from this strategic shift.
Thanks in part to Maghielse’s diversification strategy, Pets Are Kids Too was acquired in a deal
that valued the company at three times its EBITDA, with a substantial portion paid up front.
Maghielse’s journey highlights the critical insight that diversification not only shields against
market volatility but also enhances a business’s overall value.
Embracing the Mentality of the Swiss
Reducing your reliance on a single marketing supplier not only bolsters your company’s market
resilience but also notably increases its value. Adopting a Swiss-style mindset, which values
independence and strategic autonomy, is more than a tactical move; it is a key strategy for
achieving sustainable growth and boosting the value of your business in the long run.