It could be argued that a business’s most valuable asset is its goodwill. Most business owners would likely agree that although goodwill can take years to establish, it takes only minutes to destroy.
“Goodwill” is a qualitative measure of a company’s reputation, market presence, and customer loyalty. This aspect of a business is very difficult to attach a price, but any competent business will zealously guard their company’s goodwill at any cost.
While any natural disaster can destroy inventory and real estate, a store’s good reputation can withstand almost any storm. So too can the most solid of foundations be shattered by poor decisions and lousy consumer outreach.
Right now, one of my favorite shows on television is “Bar Rescue.” Bar Rescue is a reality show featuring host, Jon Taffer, a long-time food & beverage industry consultant specializing in nightclubs and pubs, who “rescues” failing bars, pubs, taverns, and grills from the brink of failure. Each episode focuses on a single failing establishment and it is up to Taffer to figure out what is the cause of the problems. Often, the root issue is a combination of poor service, management, and décor. Most of these issues can be solved with training the management and staff, retooling the drink and food menus, and renovating the interior of the restaurant or bar. In essence, the establishment gets a healthy new coat of paint and everyone is happy. Every now and then, however, Taffer has to completely overhaul everything, including the image and reputation of the establishment. Essentially, the business has so completely ruined their goodwill in its community and market that it must start from scratch.
No business should allow this to happen to itself. Reputation is more than just the sum of employee’s personalities, but a reflection of how a company conducts business. It is not just the price of goods and services, but the value offered to customers and clients. A business must always ask itself: Why should someone give me money instead of my competition? What is it that sets this business apart from any other business in that market place?
Poor goodwill is not a symptom, but the product of a diseased company culture. Whether fueled by apathy, poor management, greed, or some other cause, the result is almost always the same: failure. While some companies can survive controversy by tapping an almost limitless reserve of goodwill stored up over decades (i.e., Toyota, with its seemingly endless chain of recalls), others can falter and crumble under much less scrutiny (i.e., Kmart, which was once a titan in the superstore market, but is notorious for very low quality products and selection).
Goodwill can be cultivated and preserved by establishing sound business strategies, competitive prices, and excellent customer service. In addition, a business must possess strong internal processes to ensure productivity and efficiency and to minimize exposure to unnecessary litigation.
A small business legal consultant can assist owners and managers in making sound business decisions to protect the company’s goodwill by providing expert advice and consultation on a host of issues, including hiring practices, employee management and compensation, vendor relationships, inventory and financial planning, and other day-to-day business decisions.
Robert S. Bexley, Attorney
Bexley Law Firm, LLC