Goodwill for a business is what reputation is for a person. If a business wants to sustain even in the face of recession, this asset is what helps them thrive in that tough time. Goodwill is essentially an emotion evoked in us when we create a good bond with other person that is built with time and attention. Once goodwill is acquired, it proves significant not only as a competitive advantage, but also it is equivalent to solid cash. It is an intangible asset which can be represented in the balance sheet. Goodwill is generally built up by values like strong brand name, excellent customer relations, consistency in services, good employer-employee relations, etc.
A simple way to describe goodwill is the difference between the current market value of the tangible assets of the business and the total value of the business. Total value of a business is determined by available cash flow and the risks associated with obtaining it. Yes, the other aspects of the business such as manufactured goods, service, market, and growth potential matter too. But how buyers evaluate and ultimately gain outlook of those aspects of the business is how much cash flow it generates.
If yours is a new business still in the process of establishing its name in the market it is never too late to start working on acquiring goodwill. What are the ways in which goodwill of the business can flourish?
v When local popularity of the business starts growing, “word of mouth" publicity and recommendation leads to recognition of brand name and
v Consistency in good service helps build trust amongst regular clients and creates reliability.
v Care and respect for the customers/clients and other satkeholders shows in each and every kind of communication with them. Everything is branding. There is nothing wrong in appreciating your fans and making them feel cherished.
v Prioritize making the customer happy. It should be the motto of the business that the customer should leave happier than he was when he had come. Be it by communication skills or by providing unexpected surprises for the clients, it is always a good investment for increasing the value of one’s goodwill.
v Not all successful businesses care about the customers/clients after the transaction with them is concluded. Having a follow up after the purchase exhibits the extent to which the customers are valued and in turn instigates “word of mouth” publicity.
v Being real and being fair. You have to have a brand that is completely open and transparent. If you falter (and you may at some point) then the best approach should be honestly admit inform your clients and as far as possible be realistic with your customers/clients. They know you’re human and they’ll respect you a thousand times more for being upfront and real with them. Don’t ever try to hide something or trick people. Not owning up and admitting to mistakes gives business a bad name. Make sure everything you do and offer is crystal clear.
v Intellectual property rights : Trademark of one’s brand name is what brings in millions of customers and makes your business popular. It is more than just a sign post that brings in customers and once a brand name becomes popular, it is worth a lot. In fact, when buying a small business most of the value of the business comes not from the tangible assets, but the intangible ones.
Goodwill is all about honesty and ethics which go along with good businesses. The harmony in relations between people who come together to do something good for the society with their services, reflects on the outside too. It is not hard to build goodwill in the market as long as you know which areas to focus on and what needs to be done in order to implement them successfully.