Tax Tip of the Week | Naming Your New Company

 There is so much to do before you start your own company. You have to develop a business plan. You have to find financing. Oh, and you have to give it a name.
 
Consider that roughly 627,000 businesses open every year in the U.S., according to a Small Business Administration estimate. That is a lot of new names. How do you make your company name stand out or, at least, be remembered among so much competition?
 
Here are tips from researchers who have examined the names that work—and those that don’t:
 
It’s OK to name your company after yourself
 
Naming a company after yourself might seem like an indication of an inflated ego. But it can be a sign of confidence.
 
“We do know that the kind of person who names a company after themselves tends to be a good founder,” says Aaron “Ronnie” Chatterji, a Duke University business professor, adding, “The sort of person who is willing to tie their name and their personal reputation to a business is more likely to succeed.”
 
In a study of 1.8 million European small businesses between 2002 and 2012, Dr. Chatterji found that eponymous companies had a return on assets about 3 percentage points higher than other firms.
 
Dr. Chatterji’s study found that unconventional last names were much less likely to be used, yet much more likely to be successful. People’s intuition is that “if you have a very rare name—think of names like Gucci, Porsche or Guinness—the chance that your business will be identified with you personally is very high. So, only the best do it. There is no place to hide,” he says.
 
Still, Dr. Chatterji does not specifically believe that naming your small business after yourself will make it more successful. And he advises that founders should never name a company after themselves without first receiving substantial feedback from potential customers, friends and even family.
 
Keep it short and simple
 
There is a psychological concept called “fluency” that says the less mental effort the better when remembering a name. “We tend to think of things more favorably when they don’t require a lot of thought,” says T. Clifton Green, professor of finance at Emory University, who oversaw a 2013 study on name simplicity. The study suggests that when naming a brand or small business, it is usually best to keep the name short and simple.
 
Fluency, in fact, is why some companies ultimately change their names.
 
Spell it right
 
When you coin a new word in naming your business, it is often very difficult for people seeing it the first time to remember or even to pronounce the name, says Dr. Green. That is why his simplicity study particularly discourages misspelling words in your business name. “People will remember it spelled the right way and have trouble finding you at all,” he warns. For example, he says, while the name Karl’s Kar Repair might look clever with its intentional misspellings, it is much easier for people to mentally process the name Carl’s Car Repair—and that is the name that will likely be looked upon more favorably.
 
Create a logo and slogan at the same time as the name
 
No company name exists in isolation. If you create only a name but fail to create a slogan and a logo, “you are missing a golden opportunity to tell the public what your business is about,” says Chiranjeev Kohli, professor of marketing at California State University, Fullerton, who oversaw a 2013 study on slogans and brand identity. For example, a small plumbing business named Bob’s Plumbing without a slogan tells very little to the public. But combine it with the slogan “24 hours guaranteed,” and you are informing potential customers that you’re responsive and reliable, he says.
 
Emotional connection matters
 
“For my money, the single most important characteristic that I’ve discovered in my research is the emotionality of a name,” says Kim Robertson, an associate professor at Trinity University, who wrote his dissertation on the topic. That is why brand names like Caress or Snuggles or organization names like Madd (Mothers Against Drunk Driving) or Glaad (Gay and Lesbian Alliance Against Defamation) can be so powerful, he says. The emotional connectivity of a name typically makes it much more memorable, he says.
 
For a small business, using emotional codes in the name—say, a word like “love”—can be powerful. For a funeral parlor, he says, an emotional name like Peaceful Surroundings can be quite effective; for an insect-extermination company, the name Kill ’em Dead—even with its negative connotations—can be effective because of the strong emotional codes.
 
Avoid geographical names
 
Think twice before naming your small business after its geographic location, says Dr. Robertson. The problem with such a name is that it really isn’t distinctive and says virtually nothing about what distinguishes the business: A name like Ever-Bright Lighting is more special and memorable than Townville Lighting, he says, because geographic names tend to be commonplace in a specific market. After all, the same area likely has businesses named Townville Auto Repair, Townville Cleaners and Townville Cinema.
 
That said, there are occasions when geographic locations indicate that the product has a specific benefit, and they reinforce what customers know or feel, says Kevin Lane Keller, a marketing professor at Dartmouth College. For example, he says, geography can be a plus when a maple-syrup producer names itself Vermont Maple Syrup or a music-production company names itself Nashville Music.
 
Don’t be too specific
 
In the long run, too specific a company name may limit your company’s ability to grow or even sell its practice, says Dr. Keller. For example, because of its name, Toys ‘R’ Us severely limited its ability to expand into other areas, like apparel and electronics. “That’s why Amazon is such a smart name,” he says. “The name is memorable but not limiting.” So, if you have a small dental practice, he says, you might be careful about naming it after your specialty. Sometimes a broader name, like Comprehensive Dental Care, can keep more avenues open.
 
Don’t get too cute
 
Overly creative company names might seem very clever, but they are rarely memorable, says Dr. Keller. “You want to choose a name that, as much as possible, is fairly transparent about who you are and what you do.” The name is the very foundation for telling the story about the brand. A name that is too cute is likely to sail right over the heads of your potential customers, and they’ll fail to make the connection, he says.
 
Credit given to:  Bruce Horovitz.  Published Sept. 3, 2021 in the Wall Street Journal.
 
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This Week’s Author, Belinda Stickle

-until next week.