This post has been modified to reflect new information since its original publication.
Warren Buffett, the CEO of Berkshire Hathaway, is one of today’s most respected businessmen—and he got that way, in large part, by placing a premium on the importance of reputation.
Known as the “Oracle of Omaha,” the 91-year-old Buffet has a net worth of $103.9 billion, which makes him the sixth-richest person in the world. Most of this wealth comes from his achievements in the stock market. In fact, Buffet has beaten the market more than any other investor. Consequently, many people seek his advice regarding business and investment decisions.
One consistent theme in that advice is the value of a good reputation. Simply put, your reputation, and/or the reputation of your business, are among the most important factors in determining whether or not you are successful.
Using the following Buffett quotes, we explain why this is true and how it applies to your business’s online presence.
“Integrity is a reputational advantage that others will weigh in subsequent dealings”
If your firm has a strong culture of honesty and transparency, then everyone who deals with your firm will witness it and remember it the next time they need a product or service you offer. In fact, according to a 2016 report by the Temkin Group, 86 percent of customers who have good experiences with businesses choose to buy from those firms again, and more than 75 percent of these happy clients will tell others about their positive experience.
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On the other hand, if a customer associates your brand with dishonesty or obfuscation, then the negative association will linger in his or her mind, thus making it is incredibly difficult to win back the person’s trust. According to a Zendesk study (PDF), 95 percent of individuals who had poor experiences also share their stories on review sites, which can cause potential customers to avoid your business.
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
While this doesn’t appear to be about reputation on its face, it actually is because Buffett’s advice here is a great way to improve your company’s image. Every interaction customers have with your employees has the potential to shape what the public thinks of you. Therefore, you need to make sure that all your employees, from the mail clerk to the CEO, display the highest levels of integrity and responsibility. Merely saying that you “truly value your clients” in your mission statement isn’t enough to offset the fact that your customer support team is rude or ill-trained.
Another reason it’s so important to avoid hiring any “bad apples” is that when you inevitably end up letting them go, these disgruntled ex-employees can stir up a social media storm that will further damage your company’s reputation. In one example, Kourosh Kenneth Hamidi, got revenge after Intel fired him by creating a website all about how terrible it is to work for Intel. He also emailed the company’s employees to warn them of the business’ unfair employment practices.
“A promise is no better than the person or institution making it.”
Your job isn’t done once you acquire a new customer. This is only the first step in the consumer/business relationship. To create a trustworthy brand and grow your company, you need to meet customers’ needs during every interaction they have with you. This means keeping your promises—even implied ones. Building a strong, lasting reputation means getting your entire organization, including sales, shipping, customer service, marketing, and product design, on board with your commitment to customer satisfaction.
“Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.”
During his childhood, Warren Buffett saw that having enough money was the key to being secure and free; this spurred the young Buffet to begin his quest to accumulate as much wealth as possible. Although he still values earning money, he told his senior management team in 2014 that they now had a higher directive—to protect the company’s reputation. In a memo, Buffett stated, “The top priority—trumping everything else, including profits—is that all of us continue to zealously guard Berkshire’s reputation.”
He went on to say:
“We can’t be perfect but we can try to be. As I’ve said in these memos for more than 25 years: ‘We can afford to lose money—even a lot of money. But we can’t afford to lose reputation—even a shred of reputation.’ We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.”
A good reputation is worth real money and can affect a business’ bottom line. In fact, some banks consider a positive reputation to be the same as a line of credit. Buffett understands this because he sees the tangible value of Berkshire Hathaway’s reputation in his business dealings.
Lawrence Cunningham, the author of Berkshire Beyond Buffett: The Enduring Value of Values, states that Berkshires’ reputation is so valuable “that sellers undeniably treat it as a valuable part of what they receive on the sale … This enables Berkshire to acquire companies at lower prices than rival bidders.”
One example of this is when RC Willey, a home furnishings business, accepted a purchase price of only $175 million from Berkshire Hathaway in 1995, despite the fact that the company had received multiple offers for over $200 million. In the end, RC Willey ended up paying $25 million just for the privilege of being acquired by Hathaway and its stellar reputation.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Your reputation is everything when it comes to succeeding in business. If you have a bad online image, you won’t attract new customers.
When people want to learn about a business, the first thing they do is search for it on the Internet. In fact, 97 percent of consumers read online reviews before they consider doing business with a company. This means that the information that appears at the top of the results for your firm’s name can profoundly affect whether or not a potential customer will consider purchasing your product or service. If the top results for your organization portray it in a negative light—regardless of whether or not this reflects reality—then consumers will quickly shift their attention to one of your competitors.
The most important thing to remember about your company’s reputation is that it is fragile. Don’t rely on your past successes to shield you from future problems. To protect your reputation, you need to be proactive; this means you must constantly monitor what others are saying about your business and respond professionally to negative comments and reviews right away.
Further, you need to actively promote a positive online presence. This might include answering questions on a business forum, posting informative blogs on your site and others, or supporting charitable efforts in the community—as long as it helps you establish your business as an authority in its field.