Goodwill Hunting

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.

reputation

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
http://www.bexleylawfirm.com

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What can small businesses learn from Paula Deen?

I am an active user of Facebook. The site provides an easy to use forum to keep in touch with friends, family, and to help promote the things that interest you. It is also a good way to share ideas and to discuss the topics of the day with people from a wide variety of backgrounds and cultures. So, when a hot issue starts making its way around the country, it is inevitable that Facebook users will be there to dissect it in every way possible.

I do not want to be sued by Paula Deen, so here is a picture of a pound of butter.

I do not want to be sued by Paula Deen, so here is a picture of a pound of butter.

Case in point: Paula Deen.

For those of you who have been living on an island with a basketball named Rawlings, here’s what happened: Paula Deen, a celebrated chef that specializes in rich, savory Southeastern American cuisine, is being sued by a former manager of one of Deen’s restaurants for sexual and racial harassment.  During a deposition of Deen, she admitted to having used racial epithets in the past. Once these statements were made public, Ms. Deen clumsily attempted to apologize and ultimately made things worse.  Coupled with some problematic public statements Deen made on some television shows, several very prominent sponsors have chosen to either not renew her contract, or to dump her altogether.

In reading the various responses and replies, I noticed that many people were either dismissive of her behavior or were apathetic to the inane ramblings of yet another celebrity. The problem is that Deen is not just some television celebrity, but a restaurant owner that operates 2 locations and employs dozens of people (not to mention the crew that records and produces her show). Paula Deen is a celebrity business owner, and a business owner still has obligations to her employees and business partners. And Deen’s business owners are none too pleased.

To date, Walmart, Target, Kmart, the Food Network, Sears, Home Depot, and others have all dropped Deen.  Caesar’s Entertainment, which owns Harrah’s Casinos, will rebrand all four of their Paula Deen in-house restaurants. A spokesperson for Caesar’s Entertainment stated, “it is in the best interest of both parties to part ways.”

When entering into partnerships with another business, whether for advertising, endorsements, or for services, small businesses should always ask, “Is this in my best interest?” Due diligence is essential before chaining one’s business to any other entity.  Despite popular misconception, the Food Network did not “fire” Deen, but it did not renew her contract. A fine difference, but an important one. Had her contract not been eligible for renewal right as this controversy broke, then it would have been much more difficult for the Food Network to have terminated the relationship.

A business must sustain itself on the quality of its product or service and its goodwill within the community. Thus, regardless of the personal politics of the owners, to take unnecessarily controversial stances is to court bad publicity. Generally speaking, the best path to take as a small business owner is that of least resistance. Do not alienate your customers. Do not ostracize your business partners. Do not discriminate against your employees. Walmart, Target, Home Depot, etc. risk losing 100 customers offended by Paula Deen’s comments for every one of those who would stick with her to the gates of Hell.

Robert S. Bexley, Attorney
Bexley Law Firm, LLC
http://www.bexleylawfirm.com