Hey...

Did you know that if your business sells something the market sees as interchangeable, the value of your company is impacted negatively?

Would-be acquirers can smell commodity businesses from a mile away. No moat means price wars. Squeezed margins and subpar multiples.

Here's the math: The average small business earns a 3.9x multiple of pre-tax profit when/if it sells (~80% of businesses never sell)

Compared to companies with a monopoly on what they sell?

That multiple jumps 25%.

They're also 40% more likely to get offers.

(While monopoly sounds scary, it just means you've clearly differentiated your offering in this context.)

Rich Galgano's Wire Story

Rich built Windy City Wire by selling the most commoditized product imaginable: copper wire.

Instead of competing on price, he solved tiny problems his customers didn't even know they had.

His first move?

Color-coded insulation for low-voltage wire. High-voltage had been color-coded forever, but no one thought to do it for low-voltage.

Contractors could work faster while making fewer mistakes. This resulted in real money saved on job sites via simple color coding.

The Moat Was in a Box

His second breakthrough was packaging. Traditional spools were a pain to use as they were bulky, tangled and inefficient. Galgano developed a system that made pulling wire clean and easy.

And then he patented it.

Same exact wire. Different experience. And competitors couldn't copy the box since it was his intellectual property.

Over time, Windy City became the go-to for major contractors and Fortune 500s. It wasn't because the wire was better, but because everything else was.

Results....

32 straight years of EBITDA growth, and he sold for just under $500 million to a strategic buyer.

The Lesson

Galgano didn't reinvent wire. He just reimagined how it was delivered.

If you're stuck in commodity hell, stop looking at your product or service.

Look at the friction.

What slows customers down?

What do they tolerate that you could delete?

Fix those problems, and you've got something worth paying for.

-KO

P.S. Did you know that companies focused on transferable value see 45-72% increases within their first year? Most owners build income, not value. There's a big difference. As a Certified Value Builder, I help transform founder-dependent operations into investment-grade assets. Someday we all exit. Why not be prepared?

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