Born to Run - The Value of a Unique Brand
Walk into any midsize city on a weekend and most likely you will be able to find live music of your favourite artist. Furthermore, Drink and food specials are often included to make it a complete evening of entertainment.
There is a catch. This live performance from your “favourite artist” isn’t the true artist but rather one of many tribute bands that arise to sing the artist’s music and tour with the artist’s repertoire.
For example, in October 2017, a well known Bruce Springsteen cover band come and played in Dubai with the price of attendance set at 75 dhs (USD $20.42) which included a free drink. Assuming 975 people attended, the band would have grossed AED 73,125 or USD 19,910. After 5 nights the total door take would have been AED 365,625 or nearly USD 99,950.
As a well known cover band they might have taken home USD 2,000 – 3,000 per evening or altogether USD 10,000 – 15,000.
In 2018 Bruce Springsteen himself sold out the Walter Kerr Theatre (975 capacity) for 5 days and earned nearly 2.425 million USD or AED 8.9 million.
In this example this was one of the better known tribute bands. Most tribute bands earn much less and often after the concert, end up having to pay out of pocket for the drink tab they used.
In many cases, these tribute musicians are looking to be discovered and hope to pay their rent using the tips they get by playing other people’s songs. Most are lucky to eke out a modest living while the stars they impersonate run thriving empires.
What’s going on here? Is Bruce that much more talented than the dozens of artists playing his songs every night, especially the ones who look and sound like him?
Of course not.
The difference comes down to who controls the product. In Bruce’s case, he owns the music and the personal brand he has created to perform it. The cover artist is just reselling his stuff.
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The Value of your Brand
The music business can be a helpful analogy in explaining why creating a unique brand is such a big contributor to the value of your company. Acquirers want what they could not easily copy.
If you’re simply reselling other people’s products and services, an acquirer will likely argue that there are probably dozens of competitors driving down your margin next to nothing. Further, they may even conclude that they too could earn a license to resell whatever you’re distributing and will, therefore, place little value in the company you’ve built.
However, if you have something exclusive – a unique product or brand or way of delivering a superior experience to your customer that makes people believe what you do is different – an acquirer will pay more, arguing it is difficult to reproduce what you have created.
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. Look at Amazon. They started by selling books which were written by other authors. Over 25 years later, they have built a global empire mainly on the unique customer experiences they provided.
Another example is Peloton – which on the surface looks like it is just selling a stationary bike. However, it is the unique community they have created around the bike –including the paid subscribers – that has recently driven Peloton’s value north of USD $36 billion (almost six tims higher than the IPO in September of 2018).
Have you identified what makes your business unique? What value can it drive in the market?
To drive up the value of your company, own the stuff you sell. If that’s not possible, create a unique brand or customer experience that makes consumers feel as if you do.