The name of a company is the first impression it makes on the public. Despite its importance, a business name has a number of hidden charges that aren’t frequently acknowledged. Many of these expenses are only discovered when problems develop. Some may go unnoticed entirely. Knowing what they are can save you a lot of money — and a lot of stress – in the long run.
The distinction between company name and trading name, which are not always the same thing, is the most basic business name consideration. The most well-known trading name in the market generates both opportunities and costs. It’s also important when selling a business.
Management of one’s reputation
The majority of businesses that bear their founder’s name do so to capitalize on that person’s excellent reputation in their profession. It is, however, a two-edged sword.
If the company has a public relations disaster or is discovered to be guilty of wrongdoing, that person’s personal reputation will be harmed as well – possibly permanently. Businesses can rebrand for a fresh start, but individuals do not have that option.
Should the company be sold in the future, that person will lose all managerial and reputational control. Again, if customer service deteriorates or the company goes bankrupt, this could tarnish their reputation.
Trademark infringement lawsuits over identical names can and do arise. However, there are several advantages to trademarking a name. Consider the costs of trademarking versus the potential for future conflicts and losses as the company grows.
Having a name that sounds similar to another company – especially one in the same industry or specialization – might cause misunderstanding. Not only for customers, but also for legal, financial, tax, and supplier difficulties, as well as more basic issues such as misplaced mail.
Businesses named after their street or suburb that later migrate to a new region could be considered in the same category.
Consider your ownership structure as well. If the company is linked to trust or self-managed super fund with a similar name, regulators and the tax office may have issues.
Clarity in service
Many firms today choose names that are contemporary and sound unique or innovative. These names, on the other hand, frequently reveal little about the items or services on offer.
Customers may miss such names in favor of competitors who are immediately distinct, putting the company in danger of losing sales.
This is especially true in the internet world, where search engine optimization is a major driver of traffic.
Implications of the sale
Believe it or not, a company’s name has an impact on both demand and value when it comes time to sell.
A bad reputation may limit the pool of possible purchasers for your company. A pricey rebranding could potentially be included in price talks by interested parties. A strong name and solid brand, on the other hand, can result in a higher sale price.
Separately, other business owners – notably professional service providers – regrettably closed their doors at retirement, despite the fact that they were unaware of their business’s inherent market value. Client/customer lists and intellectual property are examples of intangible assets that can be sold.
Failure to sell those assets might result in a significant financial loss, undoing years of hard work that went into creating the company.