The Meaning of Goodwill

Let's study the concept of goodwill.  There are two definitions of the word, and the two definitions are somewhat related.  

Definition 1:  Goodwill is a feeling or a state of mind.  It is defined as kindness and benevolence toward a person or a company. Let's say you have a favorite restaurant.  You are comfortable there.  The food is good.  You enjoy the management and the wait staff.  The restaurant has goodwill that you give them.  They probably reciprocate.  The wait staff enjoys you and probably gives you a little better attention.  It is a friendly relationship that is mutually beneficial.  

This kind of goodwill isn't just between a company and a customer.  It is in every relationship.  It is the feeling and actions that say “We care about our vendors and want them to do well,” or “We value our employees and want to treat them fairly.”  Goodwill is a two way street.  We behave with goodwill toward others, and in return, they behave with goodwill toward us.

Definition 2:  Goodwill is a financial asset.  When a business is bought, or when it is valued for purchase, the assets being sold are listed.  There's equipment, furniture and fixtures, and inventory.  These are solid things.  But in most business sales, the amount paid is higher than these solid things.  This extra value is called Goodwill.  When a business is sold, in a lot of cases, the Goodwill far exceeds the value of the other assets.

In a strict sense, these two definitions are totally different.  They don't mean the same thing at all.  However, they are related.  

I'd like to encourage you to focus on the first definition.  If you make definition 1 a routine habit in your business, as sure as the sun rises you will build definition 2.  

If you and your employees share mutual goodwill, they will refer good people to come to work for you. Your vendors will go to bat for you when times are tough.  Your customers will stick with you.  Your neighbors will help you out.  All of these things will make it easier to succeed in business, and they will add financial value over time.

Goodwill can’t be bought.  It can’t be taken.  It can’t be put in a box.  But it is very real.

Also, goodwill is not quite like anything else.  You give it away and it comes back to you.  If you keep giving it, you can never get rid of it.  But if you try to hold it all to yourself, or use it only for your own benefit, you lose it. 

In the blog, I've written about goodwill as it pertains to business.  But all of the concepts apply equally, or maybe even more, to life.  Almost everything in this world is easier and better when we operate with goodwill toward others.