When the economy is in a period of uncertainty and there is a downturn, the goodwill that has been built into the business can allow the business to stay afloat, and even to make a profit. During economic downturns, the only businesses that can still make a profit are those that have established goodwill in their community. Goodwill is what gives a business a great reputation, and it adds value to a business, over and above any tangible assets the business owns.
What Is Goodwill?
Goodwill can take years to develop, but it is always a worthwhile asset to a business. It includes things like the good reputation of a company, which helps the company to continue to be profitable, and the reliable base of clients a business has. A company with a great reputation will have clients that are loyal to that business and love doing business with them no matter what is currently happening in the economy.
Why Is Goodwill Important?
For a business, goodwill is a crucial thing to build into the company, and may be the one thing that really helps to keep the business going on even in times of economic uncertainty. If a company has a great product, effective advertising, and is very well managed, customers are more likely to keep going back to that business. Customer/ client loyalty to a business is the biggest feature of goodwill, and should always be fostered and closely guarded. A business with a stellar reputation will go much further than one that has received complaints, for example.
Why Being Nice Pays Off
In the case when a business occasionally makes a minor mistake, it is more likely that the business will be forgiven if they have established goodwill in the community. Customers are likely to give that business the benefit of the doubt, and keep returning even if there has been a mistake made and especially if the company owns up to it straightaway.
When accounting is done for a business, the value of the businesses goodwill is taken into account, and is considered to be an intangible asset over and above the businesses physical holdings and assets.
It is difficult to put a monetary value on goodwill, but it is imperative for any great business to build a sense of goodwill into their business if they are to be successful. Customers will keep returning to a business that has a great reputation, is well run, and deals honestly and openly with people.