You can craft a novel idea, create an organization from the ground up, map out your business plan and hire a quality team, and still struggle with one seemingly minor detail: choosing a name for your business.
Your company's name should not be settled on or taken lightly. Consumers will inevitably make assumptions based on your brand's name, and if it doesn't represent what you seek to be, then you're starting off on the wrong foot. While you're never trapped with a name, you should choose one with the intention of maintaining it for years. Here's how to do it.
What's in a name?
Don't judge a book by its cover, right? Well, we tend to do so anyway. Similarly, consumers tend to judge a business by its name.
Business names matter – a lot. While a great name can spark a successful breakthrough, the downside can be equally significant, said Phil Davis, president of Tungsten Branding.
Many owners name their businesses after a specific product or service they provide. This, however, can cause issues when the company begins offering something unrelated to its name. For instance, IHOP (previously known for its pancakes, which are no longer the hot sellers they used to be) just started using the name IHOb, or International House of Burgers, to better represent its changed brand (though this may be just a temporary marketing stunt). Situations like these are why many companies rename themselves over time.
Companies also look for new names after mergers and divestitures. Businesses encountering similarly named competitors after entering new markets often rename themselves to sort out trademark confusion. Others may rename to leave negative events behind them. And, of course, every new company must come up with a new name.
Choosing a name
Having the right name can save money, because a business doesn't have to spend advertising and marketing dollars clarifying or elaborating on the muddled message that the wrong name conveys. A good name can also help lift a provider above competitors, reach out to new markets and open doors to further growth.
Renaming is less about picking a name than building one, naming experts said. It starts with defining your business, its brands and its goals, said Amanda Soderlund, product manager at Clutch and author of a report on naming.
"Most businesses have, unfortunately, terrible or mediocre company and product brand names," said Jay Jurisich, CEO and creative director of naming agency Zinzin. Bad names are often inherited from predecessors, but Jurisich said he also blames lousy name-creation processes.
The name you want will likely express how your business does business, not just what you sell, he said. That means avoiding literal descriptive names of products or services, as well as geographic references that may limit your marketplace.
Defunct computer retailer CompUSA committed both of these errors, Davis said, while still-thriving competitor Best Buy took a less specific approach that has proven more successful.
"They named themselves after a timeless attribute," he said of the surviving company. "Saving money never goes out of style."
Most businesses contemplating a name make what naming experts consider a cardinal error. That is, they look for a name that they like. "Choosing a name based on personal inclinations" is one of the typical errors Soderlund listed. Another mistake she said she sees a lot is "selecting a name that 'sounds good' or 'seems fitting,' then validating these names through friends or family without any real strategy or viable backing."
Also avoid trying to make your name say everything about your business. "The name should be the beginning of the conversation," Davis said. "Not the ending."
After that, it's about trade-offs. Invented words used as names – think Exxon – reduce risks of confusion with others, but it takes lots of time and marketing dollars before their meaning is established with customers. Newly coined words may also have negative connotations in other languages and cultures.
Existing words that can be found in the dictionary come with established meanings, but they are also likely to have established competitors attached to them. One key concern about naming is whether trademark and domain names are available, and many common words are already taken in these areas.
An effective compromise may be a common word that summons up a business's personality without being directly connected to either its own or any other company's product or offerings. Nest, the name of a company that sells programmable home thermostats, is an example of this approach.
Soderlund said that most successful names come from professional namers, not ad hoc naming committees of company insiders. Hiring an agency to come up with a name can cost anywhere from a few thousand to a few hundred thousand dollars. Management time will be required to help the namers understand the business, brands and markets. More money will be required to market the new name and perhaps change stationery, signage and packaging.
Additional reporting by Mark Henricks. Some source interviews were conducted for a previous version of this article.