A neighboring grocery store went bankrupt, and a bookkeeper who was called in by the lawyers to help inventory the bankrupt stock says he never before realized the difference between a dead business and a going concern.
Here were cheese and vegetables and meat, he found, which would have been salable the next day if the store had kept open. Here were accounts with nearby customers which might have been paid by the next payday, but now would have to be turned over to a collection agency. Here were canned goods which could have gone to make up the weekday meals of a hundred families, but now would have to be sacrificed as “bankrupt stock.” No one who has not helped to salvage a disordered store and turn odds and ends into cash at a quick sale can realize how much it shrinks in value.
Every business accumulates a friendliness on the part of the customers which becomes part of its stock in trade. The habit of stopping at a certain store to buy, or the familiarity which leads one to ask for an advertised brand of anything, forms an asset as important as building and fixtures. It is this fact which enables companies about to issue stock for public sale to place a large value on their good will and to issue stock for its full amount. The money which has been invested in years of careful advertising builds up a fund of good will solid enough so that bankers lend money on it–when they lend money on anything.
My copy of “Thoughts on the Business of Life” is copyright 1949 with individual articles copyrighted between 1927 and 1949, so I can only limit the date of this article to between 1927 and 1949. It’s certainly still applicable today, and as applicable to knowledge businesses as it is to retail firms.
Entrepreneurs who are facing the challenges of closing a deal with their first few customers can be surprised how hard it is to get on prospect’s calendars and get them to return calls. Problems that will be an order of magnitude easier to manage once the prospects become customers. Credit relationships with suppliers, partners, and customers can also take a long time to establish and are equally valuable.
As you consider how to get through the recession of 2009 (or what I hope will be called the recession of 2009, instead of the recession of 2009-2010) Feather’s observations from perhaps 80 years ago are well worth bearing in mind. Find a way to continue to operate, even if in a reduced fashion, as a set of ongoing customer and supplier relationships have considerable value and act as a force multiplier on your other assets.
I close with two related quotes on reciprocal obligations from Margaret Atwood’s essay “A Matter of Life and Debt”
Debt–who owes what to whom, or to what, and how that debt gets paid–is a subject much larger than money. It has to do with our basic sense of fairness, a sense that is embedded in all of our exchanges with our fellow human beings.
We are social creatures who must interact for mutual benefit, and–the negative version–who harbor grudges when we feel we’ve been treated unfairly. Without a sense of fairness and also a level of trust, without a system of reciprocal altruism and tit-for-tat–one good turn deserves another, and so does one bad turn–no one would ever lend anything, as there would be no expectation of being paid back. And people would lie, cheat and steal with abandon, as there would be no punishments for such behavior.
Here are some earlier blog posts that include excerpts from William Feather’s “The Business of Life.”
- Recipes For Longevity in “Mutual Improvement Clubs”
- William Feather on “Perseverance Rewarded”
- More from William Feather’s “The Business of Life”
- includes “The Jolt” which details his realization that most of his credibility flowed from his employer. Once separated and in a new job he was accorded little of the same respect. This is something many entrepreneurs take a while to realize in their new role: they must work hard to re-establish the trust and credibility they had been afforded as employees of an established firm.
- William Feather’s “The Business of Life”