One of the first things that needs to be done when starting a business is give it a name. Ok, sounds obvious I know but notice I said give IT a name and not give YOUR business a name. As rich serial entrepreneurs will tell you, the idea of going into business is to sell it to make your profit. Sounds a bit alien to those of us who just want to make a living from doing what we love to do doesn’t it.

However, if you really want to aspire to be another Richard Branson then this is certainly one of the best ways of doing it. Mr Branson sells large shares of his businesses as soon as they look profitable and has been known to sell the remainder of the business when a good enough offer is made or when he wants to raise capital for a new business. And boy has he made some capital.

Business names generally come in four formats. There are advantages and disadvantages to all of them.

First, and most common, is using your own name. The advantage here is that you are legally entitled to do so even if someone else is using the same name. A disadvantage is that if someone else is using it there usually has to be a modification made, like a place name added to it or some form of identifiable difference.

More on this below in fourth type of business name. There are more disadvantages. When it comes to letting people know what you do advertising has to be bought and some clever copywriting needs to be done so that whenever your name is heard then it’s associated with your business and vice versa.

Best example ever of this is with the name Hoover. When you get your name so well known that people refer to “Doing the Hoovering” rather than doing the vacuuming, then you know your advertising worked well. Wonder if that why the Bell telephone company was so called? If you know perhaps you’d like to give me a bell on that one.

Second type of business name is one that refers to what you do, or sell. I’m sure everyone knows what these companies sell just from their name alone. Kentucky Fried Chicken, United Airlines, Pizza Hut, Toys R Us. The advantage here is that instantly people know what you sell and no further explanation is needed as to what they do. The disadvantage is; that’s all they can do. Diversification is a bit restricted.

Third format is a straightforward name that has nothing to do with either the owners or what the business does. Amazon is good example of this as it doesn’t communicate anything directly. Primark, Nectar, Apple are all companies where the name has nothing to do with what their business is about. Apple in the USA is about computers. Apple in the UK is generally about music.

So the disadvantage to a non-descriptive name is that it needs at lot of potentially expensive brand awareness advertising to let folks know what is being sold. The advantage of course is that they could diversify and sell anything. This is what Amazon has done. Still often thought of as just booksellers when in fact they now sell whole ranges of different wares.

The last way of setting up a business name is actually a merging of two of the other types. That is where you use a non-descriptive name, or your name, and a description of what you do as part of the name.  Virgin would now come into this category because these days the various Virgin companies usually have a second name descriptive of what the business is about.

Virgin music, Virgin Airways, Virgin Holidays etc. Using your own name and a description is fairly common for a local business but is also workable on line too. For instance, if your name is Jones, and you live somewhere in South Wales, UK, for example, then it’s normal to add your type of business after your name. Like “Jones Shoes” for a shoe shop, or “Jones Cards on Line” for an Internet version of a greetings card website.

Many new businesses have suddenly acquired a name by default. This is not a good idea. For the first time ever you might be on line filling in an application form for web hosting, an affiliate program or whatever. Anything where there are account application forms to be filled in. You suddenly come across the question that says “Name of Business.” At that point usually one of two things happens.

First you carry on using your own name as a business name or you invent something fast and hope you are not using the same name as someone else in your area. I know this is true because I’ve done it and so have quite a few people I know. Usually it works out, I do know a couple of times where it hasn’t and in one case the legal owner of the business name took the new business to court after it had been trading for a couple of years and it cost the new business everything. So un-researched naming is not recommended.

So my message here is “As soon as you know you want to go into business in any form, even eBay, think carefully about choosing a business name.” Do some research into the name, or names, you come up with to make sure it’s unique. How will your name look, or be perceived, in all your advertising? Finally, think “Is this a name someone might one day want to buy.”