Why You Should Model Your Business Like Switzerland

Today’s newsletter is about how the Swiss have laid the blueprint on building businesses in the most interesting way.

As always, let me know how you enjoyed this week’s edition at the end!

Switzerland has the 3rd largest GDP per capita in the world. But how?

It’s not a manufacturing powerhouse or tourism magnet. They’ve mostly achieved economic supremacy through Swiss neutrality.

Switzerland has famously maintained neutrality throughout its existence. It remained neutral in both World Wars and has not gotten into a conflict since it signed a treaty in 1648!

Those who are neutral are not reliant. And those who are not reliant, have power.

You see this with politicians all the time. 

They always seem compromised because they are.

They have major customer concentration (lobbyists and donors) who make them act in ways that seem unnatural. This is exactly what you want to avoid when modeling your business.

There are 3 major risks to avoid to maintain neutrality:

1. Customer Concentration

2. Supplier Risk

3. Leadership Risk

Customer Concentration is an over-reliance on revenues coming from a small group of customers. 

Back in 2020, Affirm disclosed this fact in their quarterly earnings report:

Anytime one customer accounts for more than 10% of revenue, your business or acquisition target is worth less than it would be otherwise.

Note: If Peloton offered Affirm an amazing deal, they should absolutely take it. Their sales team just needs to pound the pavement to diversify that revenue breakdown.

Supplier risk is the second major item to avoid.

Let’s say you have a supplier who is your main source of fruit for your successful gelato shop. 

(When I retire I will be opening a gelato shop in Tuscany with no plans or cares of turning a profit)

Let’s take a look at what risks you could run into with the supplier: Financial strain, supply chain disruption, price hikes, quality issues, natural disasters, logistical risks, and more.

Wal-Mart does an amazing job of managing supplier risks. They constantly source products across the globe through thousands of vendors.

The efforts lower both the supplier risks and the prices for their customers.

Win-Win

Lastly is Leadership Risk. Sometimes referred to as seller dependency.

Jim Collins’ book How the Mightly Fall talks about this concept at great length.

An organization that is too reliant on it’s leader (decision making, creativity, strategic vision, etc) is doomed to die when that leader dies.

I’m gonna be honest…

I know the president of France is Macron. The president of Russia is Putin. Angela Merkel was the chancellor of Germany for years. And RZA is the head of the Wu-Tang Clan.

I HAVE NO CLUE WHO THE PRESIDENT OF SWITZERLAND IS.

They really have that neutrality thing down pat.

Switzerland's enduring prosperity is a testament to the power of neutrality. By avoiding over-reliance, they've built a strong, stable economy. 

Your business can follow a similar path.

Focus on customer diversification, supplier reliability, and strong systematic leadership, you can create a business that's modeled after the neutrality of the Swiss.

Are you ready to start building your Swiss-style business?