Do you want your business to be the cover artist or the main attraction? Stick with us here. If you walk down Nashville’s Lower Broadway any night of the week, you can hear aspiring artists belting out cover tunes from Elton John to Garth Brooks.
In many cases, these musicians come to Nashville to be discovered. However, they end up paying their rent using the tips they get playing other people’s songs. Most are lucky to eke out a modest living while the stars they impersonate run thriving empires.
Forbes estimates that Luke Bryan, country music’s highest-paid star in 2018, earned 52 million dollars. This was earned on the back of his stadium tour and through duties with American Idol and Chevy.
What’s going on here? Is Bryan that much more talented than the dozens of artists playing his songs in Nashville every night?
Probably not.
The difference comes down to who controls the product. In Bryan’s case, he owns the music and the personal brand he has created to perform it. The cover artist is just reselling his stuff. Most of the time, when you resell something owned by someone else, you’re creating a low-value business around the product.
Branding Can Create The Value Of Your Business
The music business can be a helpful analogy in explaining why creating a unique brand so valuable. Acquirers want what they cannot easily copy. If you’re reselling other people’s products and services, an acquirer can argue that there are dozens of competitors driving down your margin. This is the nice way of saying you’ve built a low-value business.
Further, they can even earn a license to resell whatever you’re distributing. Purchasing your business isn’t needed to do so. This will, therefore, place little value in the business you’ve built.
However, if you have something exclusive – a unique product or brand that makes people believe what you do is different – an acquirer will pay more. This is because it is difficult to reproduce what you have created. Differentiating yourself from your competitors will help you avoid building a low-value business.
However, if you find yourself reselling other people’s products or services, you can still drive up the value of your business by creating a brand around the way you do it.
Take Peloton, for example You could argue that Peloton is just selling a stationary bike. Still, it is the unique company they have created around the bike – including the community of riders that subscribe. This community has recently driven Peloton’s value north of $7 billion (almost eight times trailing twelve months revenue at the time of their recent Initial Public Offering).
Takeaways
To drive up the value of your company, own the stuff you sell. If that’s not possible, create a unique brand that makes consumers feel as if you do. This unique brand can include the customer service experience, the image you represent to customers, the journey you take your customers on, and more.
Creating an exclusive brand is one of the Key Drivers of Value that we train our clients on. We call it “Monopoly Control,” and it is essential.