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June 22, 2018

Small Business Advice:

Reputation Risk

"To disregard what the world thinks of us is not only arrogant but utterly shameless." ~Marcus Tullius Cicero

Jerry Osteryoung | 12/26/2012

Reputation is one of the most valuable things a business has. It is what persuades customers to either try a new business or come back to one they have worked with in the past, and at the heart of this vital component is trust.

Reputation is a tenuous thing. It is so easily damaged so you must always be on guard to ensure this does not happen.

A physician was looking for a firm who could provide financing to help his patients with services not covered by insurance. The firm he selected agreed to offer each of his patients 0% interest for the first 12 months. However, there was much the physician did not know about this firm.

One day, this physician had a patient come in and tell him that she had tried to call this lender for two weeks with no response. She was really upset because, while dealing with a major illness in her family, she had been just two days late on one payment and the firm raised her interest rate to 30 percent. The high interest rate was more than enough to upset this patient, but they had also made the rate retroactive to the start of the loan, which pushed her over the edge.

At first, the physician was baffled about why this patient would bother him with her beef with the lender. She cleared this up very quickly by politely – or somewhat politely – telling him that she only went with this firm because of his recommendation and he had significant culpability because he had selected the firm in the first place. She also added that his reputation was as much at risk as the lender.

The doctor finally got it and immediately selected a new financial services provider so his reputation would not be tarnished any further.

What every business owner must realize is that every element of their operation has the potential to impact its reputation as it affects the customer’s experience. With each function, ask yourself what the impact would be if there was a complete failure.

Take the HR department for example. What would be the impact be on the company if an employee who did nothing wrong was terminated and it hit the front page of a newspaper?

The HR scenario is possible, yes, but maybe not probable. But what about a firm who has to send technicians into customer’s homes while they are not there? What would be the impact on the business if one of these employees stole something from a home, the police were called in and the papers caught wind of it?

At one point or another, most businesses will have to deal with a bad review by a former customer. What would your response be to a negative review on a website that is very visible to large numbers of potential customers?

As you can see, there are a myriad of factors that can affect a business’s reputation. To safeguard yours, you need to constantly be on the lookout for problem areas and try to reduce the risk. If you cannot manage the risk before it negatively affects your reputation, you need to know what your next move would be. For a few examples, would you call in a PR firm, deny the concern to any reporters who call in, or issue a very positive statement?

Now go out and make sure that you identify all areas of your business that could produce some reputational risk and then determine what steps you would take if they actually occurred.

You can do this!

Other small business advice columns from Dr. Osteryoung are here. Note: Articles older than 30 days require registration (it's quick and free).

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an bestseller. He can be reached by e-mail at

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