Starting a new business is exciting. For many entrepreneurs, nothing is more thrilling than building a business that solves a big problem in a unique way. Startup founders have to make many decisions in the days, weeks and months after starting a business. One of the most important decisions comes very early—you have to give your new business a name.
StartupNation exclusive discounts and savings on Dell products and accessories: Learn more here
What happens if you pick the wrong business name?
The most significant consequence of choosing the wrong name is that you will have to go through a costly and time-consuming rebranding effort. Changing your startup’s name can sometimes be a good way to refresh your brand. A forced rebranding resulting from a claim of trademark infringement, however, can be demoralizing to you and your team. It can feel like starting over. When you rebrand, you throw away much of the goodwill you established with your customers, as well as the money you’ve spent up to that point on branding and marketing. Therefore, it’s important to select the right business name at the outset.
Related: 6 Tips for Choosing the Perfect Name for Your Dream Business
What makes a good business name?
Startup founders should balance three factors when selecting a business name: marketability, search engine optimization and trademark rights.
Marketability is complicated. You want to give your business a name that is memorable, appropriate for your product or service, reflects your core values, and clearly communicates your product or service to your customers and potential customers. That last factor is especially important if your marketing budget is limited. When you have a limited marketing budget, you need your brand name to do a lot of heavy lifting.
The second factor is search engine optimization, which can be at odds with the marketability factors. The goal of search engine optimization is to get search engines to promote your website when potential customers search particular terms. If your business name uses common terms for your product or service, your website will never organically hit the front page.
The third factor is trademark rights. The perfect name for your business might already be taken. Learning that too late can be disastrous. Startup founders often assume a business name is unencumbered by trademarks based on an internet search or when they’re able to register their entity with their state. Don’t make that mistake. When registering a business, your state’s government registration office does not search federal or worldwide trademark databases for conflicting names. If a conflict exists, you might find yourself spending hundreds of thousands of dollars defending your business against a claim of trademark infringement in federal court.
How to get strong trademark protection
Clearing the name is just one part of the process. You’ll also want to secure the trademark rights to your business name if you want investors and customers to take your business seriously.
From the trademark perspective, brand names fall into one of four categories: fanciful or arbitrary, suggestive, descriptive, or generic. Entrepreneurs must be aware of these categories because brand names in these four categories receive different levels of trademark protection.
Fanciful and arbitrary names are granted the highest level of trademark protection. Fanciful names are completely made up words. Kodak, Kleenex and Exxon are examples of fanciful names. Arbitrary names are words that have no meaning in a particular industry. Apple for computers, Amazon for e-commerce and Uber for ride-sharing are examples of arbitrary names.
Suggestive names are also given a high level of trademark protection. Suggestive names include made up words or phrases that suggest the underlying goods or services. Netflix is an example of a suggestive name.
Descriptive names are those that describe the goods or services provided. Detroit Landscape Services for a landscape company servicing the Detroit area is an example of a descriptive name. While descriptive names might be good for marketability, they typically do not receive strong trademark protection.
Generic terms are not given any trademark protection. You cannot register Apple if you sell apples or Windows if you sell windows.
As a startup founder, it’s up to you to pick a name that’s fanciful, arbitrary or suggestive. Steer clear of names that are descriptive or generic.
Sign Up: Receive the StartupNation newsletter!
You picked a name. What comes next?
Your work isn’t finished just because you’ve successfully cleared and registered your business name as a trademark. The status of a trademark can change over time. Brands like Kleenex, Google and Xerox have been at risk of losing trademark protection because of a concept called genericide. Genericide occurs when a brand name becomes the generic term for the product or service. Brands that have been subject to genericide include Escalator, Aspirin and Yo-Yo. One of your responsibilities as an entrepreneur is to keep your trademarks from becoming generic. You can do that by policing your trademarks and by having strong trademark usage guidelines.
Policing your trademark involves sending cease-and-desist letters to those who misuse your brand name or logo. Another way to police your trademarks is to monitor various trademark databases throughout the world and oppose trademark applications that conflict with yours.
Developing strong trademark usage guidelines includes educating your employees, vendors and licensees about proper trademark usage. For instance, trademarks should only be used as adjectives. They should never be used as nouns or verbs. Your marketing team might try to use your brand name as a verb or noun because it sounds fun and trendy. That’s a big mistake that could cost your business its trademark protection.
Companies at risk of losing their trademark protection often spend significant money on public education campaigns to reverse the damage. For example, Xerox has released ads explaining that Xerox is a brand name and not a verb that means “photocopy.” Velcro has made YouTube videos reminding the public that its product is not a noun. Rather, Velcro is a particular brand of “hook-and-loop fasteners.”
As a startup founder, you don’t want to spend time or money on a marketing campaign to reeducate the public on appropriate usage of your business name. It’s best to avoid the issue entirely by policing your trademarks and by having a strong trademark usage policy.
