“Good Will” Transferable, Why or Why Not (Item #7)
What exactly is “good will” in a business? Good will is the value placed on the business over the years established in the reputation, logos, trademarks, customer list and relations, vendor list, branding, marketing, and any other intangibles that makes up the business. The good will is all those things that make it what it is. It is very hard to put an actual price on this intangible.
The good will is made of the sweat and equity that goes into making a business “what it is”. We would like to think that good will is transferable but in many cases, I think it is not. For example, I know several businesses that either have transferred ownership from the original owner or have transferred to other family generations. In most cases the businesses change or transition to a business that is different. In some situations only slight changes while others, the change was so significant that the business shut down. No one can put a price on good will.
I have worked for a corporation that was family owned while it went through a generation change due to the death of the president. The company was able to continue because of the vast amount of infrastructure established prior to the leader’s death. However slowly things policies, rules, operations changed. Some things were for the better but some items hurt the business. For example, an HR policy that created a lot of displeasure deal with seniority and experience. In the past seniority was the main selection criterion for promotions within the same job classification. The new owner did away with this guideline and changed the criteria to amount of skills or knowledge. Reality was that seniority was not taken into consideration. A person employed for a short amount of time was given the promotion over someone that had more company seniority.