How Business Names Affect Earnings

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How Business Names Affect Earnings

More than 65% of Americans dream of opening a small business. Unfortunately, few understand their scope of corporate responsibility at the micro level. It is important to consider all aspects of business ownership before cutting the red tape, and arguably the most important of these concerns include the psychology of business names.

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Signs Of Quality In Names

New businesses need much more than good intentions to be successful. No company is truly safe from upended finances or challenging situations, although many of them can be prevented before they ever become a problem in the first place. The same is true of picking an intriguing, descriptive, and conflict-free business name. Signs of quality in business names should include:

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  • Self Awareness
  • Due Diligence
  • Attention To Detail

Modern companies should ensure they are making the best possible naming decision for their company. Names should be simple and memorable, creating a strong impression for consumers that is qualitatively different from competitors in the field. A name should serve as a foundation for marketing and branding efforts, and link to a core idea or principle that clearly defines the business. Business names that fail to do this may struggle against negative associations in consumer psychology.

Business Names Influence The Sales And Earnings

The psychology of poorly chosen business names affect much more than consumer sentiment. In fact, they may directly influence the sales and earnings of a business.

Sandwich company Pete’s Super Submarines found that their business name was frequently mistaken for ‘Pizza Submarine,’ leading to confused customers and decreased sales. Social media company Twttr parted ways with its lack of vowels in order to boost consumer sentiment, which worked tremendously. Dieting corporation Weight Watchers separated from a less body-friendly title in order to convey meaning simply and politely. World Wrestling Foundation infringed upon the acronym copyright of the World Wildlife Fund, causing legal actions to be taken. Each of these examples point towards the massive impact of business names on profit margins over the life of a business.

Poor business names may also be affected by legal costs and trademark fees incurred during a name change. The average corporate name switch costs over $180,000, and takes an average of 8 months to complete. Attorney fees and labor costs may average in the thousands. More, the labor costs of changed collateral may deplete reserve funds by a large amount.

If you are planning to venture into the market, ensure that the business name you choose will help, not hinder, the growth of your dream.

Business Names

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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