The importance of goodwill in your business
Lombard Accountants understand the importance of goodwill, which in accounting refers to the intangible value that a company can hold, above and beyond the pure financial value of its assets. Goodwill covers areas like brand reputation, intellectual property, and both external and internal relationships.
Lombard Accountants believe that a business that can show its goodwill in the marketplace is actually worth more – both intangibly and financially. When a company is up for sale, the price a buyer is willing to pay will be greatly increased if the seller can demonstrate this quality of goodwill.
What do we mean by goodwill?
Goodwill includes the value of your business’s brand, your loyal customers, proprietary technology, reputation for great customer service and good employee relationships. It is the amount someone is prepared to pay for your business that is above your net assets at fair value. Building goodwill in your business is not only good for its market value, these aspects of your business potentially also represent a competitive advantage.
Five key ways to build goodwill in your business through relationships
In a business context, building goodwill is all about developing a trusted and benevolent way to work with your stakeholders that can increase the longevity (and value) of your business idea. In the long term, a business that’s part of a trusted industry network has great potential in the marketplace.
- Make goodwill one of your core values – every business needs a set of core values at its heart. With the right values in place, you can put goodwill front and centre of how you operate. Be kind and thoughtful. Always be honest and upfront. And behave in a way that helps the business, but also helps your stakeholders, community and team. Living goodwill in this way makes it second nature for everyone on the team, and helps set the best possible reputation for your company.
- Nurture your customer relationships and make them feel valued – a solid customer base is one of your biggest assets. So, treat these customers well and do your best to create long-term, valued relationships. The more you can do to reinforce this value, the more likely it is that customers will become proactive advocates for your brand.
- Build long-term trusted relationships with suppliers – your supply chain is the arterial system that feeds your business. If you want to keep this supply chain stable and affordable, you need to be professional with your suppliers. Pay them on time and negotiate fairly over prices. Be reliable with your orders and work together if there are any supply problems. Treat these businesses as you would want to be treated.
- Treat your employees well and make them feel engaged – be transparent and open with your team. Keep them in the loop with planned strategies and results. Offer them great benefits and time off. Make sure they are happy, healthy and loving their jobs – and do everything you can to create a great team spirit within the organisation.
- Be truthful and honest in all your business dealings – Sometimes telling the truth won’t seal the deal, but it’s always better to demonstrate this goodwill and to be open and honest. Dishonesty is never the path to greatness and it could break the trust you have with your customers, suppliers, team or community.
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