Now that you have a good idea about what your business is going to be and where you are headed with it, it is time to begin to put your foundation in place. You will need to structure the business legally, get the necessary licenses and permits, and get funding. But before you can do any of those things, it is time to have some fun. You need to name your business and, in all likelihood, find a location for it.
What’s in a Name?
Naming your business should be enjoyable, but for some people, it is stressful. What if you pick the wrong name? What if the name you pick has already been taken? While it is smart to be cautious, it is nothing to get overly concerned about. The important thing to realize is that your business name will become your alter ego, so be sure to pick a name that reflects on you and your business well.
How do you pick a name? You have three options. The first is to pick a name that says exactly what your business is. Begin with what your business is going to do and the image you want to express. Include both in the actual name of the business or reflect those ideas in the name, so that when people hear your business name, they know what you are offering. Using this method, you want a name that says what you do and is easy to remember, for example, Mr. Plumber, Borders Bookstore and Café, or CompUSA. By the same token, you might want the business name to express the benefits that people will get by patronizing the business, such as Jiffy Lube or Quickee Mart. Here’s a great one that utilizes both image and benefits—Baja Fresh.
Be sure the name is not already in local use and that it is not too similar to that of a competitor. Try to pick one that is catchy and memorable; alliteration often works well. Also, be sure to pick a name that is not difficult to pro-nounce or spell. When people call directory assistance, you want them to be able to find you. When Nolan Bushnell invented the first popular video game—Pong—he wanted to name his company Syzygy. Luckily for him, that name was already taken, so he settled on Atari instead (a word used in the Japanese game GO to warn opponents that they are about to be conquered).
| Picking a Name | |||||
| What sort of business is it? | |||||
| What will be the distinguishing characteristicsof the business? | |||||
| What benefits will people get by coming to the business? | |||||
| List five adjectives that will describe the business: | |||||
| How will it be different than similar businesses? | |||||
| What are the names of similar businesses? | |||||
| What are the good and bad things about those names? | |||||
Based on the above, come up with five possible names for your business:
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■ Real Life Example
Walt Disney’s first business was an animation studio called Laugh-O-Grams, a company that would go bankrupt after only one year, in 1923. After the bankruptcy of Laugh-O-Grams, Walt moved to California to be closer to his brother Roy, who was recuperating from tuberculosis. Undeterred by Walt’s recent failure, Roy and Walt formed Disney Brothers Studios and set up their first animation studio in their garage. Although they quickly got a contract to create an animated character called Oswald the Lucky Rabbit, this business too was soon in trouble after Walt unknowingly sold the rights to Oswald to the distributor. Walt Disney was on the verge of bankruptcy again.
Desperate, on a train trip from New York back to Los Angeles, Walt decided to create a new character, one he would own, one with a more memorable name than Oswald, a character he hoped would save his troubled studio. That character was, of course, Mickey Mouse.
After you come up with five names that you really like, get some feed-back from people you trust; they may not think your name is as good as you think it is. Remember, your business has to serve a market need, so finding out what the market thinks about your proposed business name, even in a small and informal way, is smart.
The second method of business-name creation is to pick a name that is totally unique and has nothing to do with your business at all, such as Amazon.com or Xerox. These names are great because they are so unique that they are memorable. The risk here is that while your name may be unique, it may be too odd and obscure for people to remember it. One reason Amazon.com and Xerox are memorable names is because those companies had the wherewithal to get people to remember them and, in the process, brand their name. If you do not have a sizable marketing budget, picking an obscure name can be more of a curse than a blessing.
The last method for creating a winning business name is to hire some-one to name it for you. There are companies whose business is to come up with company and product names, and they are often fond of coining new words for names. They usually do a great job of coming up with a unique, memorable name, and get paid handsomely for their efforts—$50,000 is not Branding is not the same thing as a business name. A brand incorporates much more than that. In essence, a brand is a company’s image, logo, products, and name all rolled into one. What do you think of when you think of Nike? Probably athletic shoes, the swoosh, athletes, exercise, and “Just do it.” Your brand is what customers think of when they think of your business. Branding is a process that builds awareness of your name via advertising and marketing.
uncommon. For the right business, it may be a smart marketing move and a worthwhile investment. For others, the cost is not worth whatever results you get. It’s a balancing act between budgetary restraints and need.
Trademark Concerns
While making your final decision regarding your name, it is important to do a trademark search to see if the name already has been trademarked. If it has, you may not be able to use it. Different names are given different degrees of trademark protection. A trademark is a distinctive word, phrase, or logo that is used to identify a business. Nike and its unique swoosh symbol are protected under trademark law because they are distinctive.
Other words are given far less protection. Common or ordinary words that are not inherently distinctive get much less, or no, trademark protection, even if someone tries to trademark them. Examples of such common, nondistinctive business names include:
- Sam’s Auto
- Western Dairy
- Quick Computers
If you think there is a chance someone may usurp your company name, catch phrase, symbol, or design, then you need a trademark. Trademarks are used to identify and protect your product or brand.
Don’t make the mistake of thinking you don’t need trademark protection. Any growing business usually does. Consider the case of Spencer, who opened a furniture store in 1960. His sons joined him in the business in the early 1980s. By 1990, their enterprise, Spencer’s Furniture Galleria, had grown to 14 stores in three states. In 1997, Spencer and his sons tried to register a trademark on the name only to find that the name Spencer’s Furniture Galleria had been trademarked nine years earlier by someone else. When asked what that meant, Spencer’s lawyer explained that Spencer actually had no right to use the name Spencer’s Furniture Galleria because it constituted trademark infringement.
The name was valuable enough to Spencer and his sons that they asked their lawyer to straighten out the mess. After doing some research, the lawyer found out that the owner of the trademark never used the mark and was will-ing to sell it for $5,000. It was an expensive lesson.
Federal registration provides a number of significant benefits, including:
- Nationwide notice of trademark ownership
- Evidence of and a presumption of ownership of the name or symbol
So yes, you do want to register your name and logo. The good news is that doing so shouldn’t be difficult or expensive. It is now easier than ever to register a trademark without an attorney—the whole process can be done on-line. Most of the information you need can be obtained at the U.S. Patent and Trademark Office (USPTO) Web site, <www.uspto.gov>. The USPTO site answers your basic questions and enables you to do an online trademark search. You also can access forms and submit the application online.
In the end, the lesson for any entrepreneur naming a business is to be smart, pick well, and do your homework.
Location
As mentioned in Chapter 3, not all businesses need a great location. Re-tail businesses need to be in an area where there is a lot of walk-by or drive-by traffic, but not all businesses have such requirements. The Old Spaghetti Factory always seems to have its locations near a railroad, and you can bet one reason is because they pay much less for those properties. So there are many things to consider.
When selecting a location, you must first determine how important foot and car traffic will be to your business. A high-profile location is important when impulse buying is part of your plan. Thus, a gas station needs a great lo-cation with a lot of traffic; a dentist does not.
The things you want to consider when looking at a location are:
- Population and demographics. Will there be enough people to sup-port the business? What has been the reaction and fate of similar businesses in the area?
- Traffic. You want the site to be near some centers of activity. My father owned a chain of carpet stores when I was growing up, and he loved to be across the street from malls. He figured that he got the benefit of the mall’s advertising and traffic, but without the high rent of actually being in the mall. Is there public transportation nearby?
- Competition. Where is your competition located? Fast-food restaurants often like being bunched together, but a print shop usually likes to be the only one in the neighborhood. Are there too many competitors nearby?
- Visibility. Make sure your potential location is visible from major roads.
- Signs. You need to be sure that there are no restrictions in the lease or the law that will limit your ability to post adequate signs for your new business.
- Zoning. The spot, obviously, needs to be zoned for your type of business (see explanation later in this chapter).
- Appearance. Is there adequate parking? Is there a bathroom for the public? Make sure the place is landscaped well, has adequate outdoor lighting, and has appropriate businesses nearby.
- Interior design. A well-designed display of merchandise can make shopping easier for the customer and boost sales. Be sure to review the flow of customer traffic. A free-flowing pattern has better visual appeal and allows customers to move around, while aisles offer better merchandise presentation.
- History. Some locations seem to be jinxed. You know the ones. Nomatter what business moves into that location, it seems to last for six months before closing up shop. Avoid these locations because no matter what you do, the local clientele will already have preconceived notions about your business.
- Are there any environmental issues to consider?
- Does the facility comply with the Americans with Disabilities Act?
- Is there room to expand?
Is yours going to be a professional office? You can rent space in a professional office building or go to an executive suite. Executive suites are small office spaces in office buildings that individuals or small companies can rent. Typically, each tenant has an individual office and shares the services of the executive suite’s receptionist and use of the suite’s joint conference room, copier, postage machine, and other office equipment. All you do is move in and everything you need to conduct business is already in place. Your company is guaranteed a professional image from the start because executive suites are usually located in high-profile office buildings. You also will have a receptionist to answer your company’s phone professionally. All in all, it’s a pretty good deal.
Understanding Square Feet
Most commercial office or retail space is quoted by square foot per year. A 1,000-square-foot retail space with an asking price of $15 per square foot would cost $15,000 per year, or $1,250 per month. This price may or may not include taxes, insurance, utilities, water, and other related expenses, so be sure to find out what the quote includes.
Locations and Legal Considerations
Whatever location you choose, you must never sign the lease or purchase the property without being absolutely certain that it will be legal for you to operate the business you want in that location. There are several different things to consider:
- Zoning. Cities usually zone buildings and areas into residential, commercial, industrial, and mixed-use areas. You must be sure that the lo-cation you want is zoned appropriately for the business you want to start. Check with your city before signing any contract. Luckily, even if it’s not zoned as you want, it is possible to get a variance from the city. A variance is as the name suggests, a change in the normal rules. Your lawyer can help with this.
- Other legal issues. Find out if there are other legal restrictions thatmay affect your business. For example, some municipalities limit the number of certain types of business, such as cafes or fast food franchises, to certain areas. Other restrictions may require that your business provide off-street parking, close at a certain time, or limit the size and type of signs you may have. Your city should have a business development office that can answer these sorts of questions.
- Contract restrictions. In malls and other retail complexes, the leaseor CC&R (covenants, conditions, and restrictions) may limit what you can do. For example, in certain shopping centers, there may be a limit of no more than one news kiosk or two burger joints.
- Home office restrictions. If you are starting a home-based business,contact your city to find out what sort of occupational license and other licenses you may need. Zoning regulations may limit the number of customers you can have, the signs you can erect, or even the type of business you can start.
Negotiating the Lease
Negotiating a lease with a landlord is not all that different than negotiat-ing the purchase of a car. The important thing to know is what price you want going into the deal and remember the rule: Everything is negotiable. The lease you are given is simply a starting point.
If you are at the stage where you are negotiating over lease terms, then you have become a valuable commodity to the landlord. Finding qualified businesses that are willing and able to take on a commercial lease payment is not simple. Accordingly, you may be in the power position when negotiating a lease and you can ask the landlord for concessions and changes to the lease, as necessary.
You do so by doing your homework first. Find out how much the rent is in similar spaces. Is the vacancy rate high or low in this area? If it’s high, you can negotiate a great deal because the landlord needs you. If the space is vacant, find out how long it has been vacant (the longer the better for you). The more you know, the better equipped you will be to negotiate a good deal.
Once you are presented with the lease, read it carefully and then give it to your lawyers for review. If you find some part of the lease that you or your lawyers don’t like, negotiate that point. Remember that the lease was drawn up by your potential landlord’s lawyer and will certainly favor your landlord. Remember too that although you might be presented with a preprinted lease that may seem difficult to change, it is nothing more than a contract, and the essence of contract law is that both sides must agree to all conditions. That, in fact, is why a contract is also called an agreement. If you don’t agree, it can be changed.
Above all, try to cultivate a good working relationship with your land-lord. That will go further toward working out problems than a dozen letters from your lawyer.
Location Worksheet
1. For population information on this area, I contacted:
| □ | Real estate agents | □ | Local planning and zoning boards |
| □ | Census data | □ | Chamber of commerce |
2. The population is:
a. Steady
b. Growing
c. Declining
3. The residents in the area are (check all that apply):
| □ | College aged / Young adults | □ | Middle-aged |
| □ | Young families | □ | Elderly |
a. Lower
b. Middle
c. Upper
5. The three major types of businesses in the area are:
6. The number of new businesses opened during the past year is:
7. “Anchor” tenants and other major draws to the area are:
8. Name, address, and proximity of each competitor:
9. For each potential location, answer the following:| Traffic area: | □ High | □ Low | |||||||||||||
| Easy access to: | □ Transportation hubs and freeways | □ Bus lines | □ Pedestrians | ||||||||||||
| Adequate signage? | □ Yes | □ No | |||||||||||||
| Safe from crime and other hazards? | □ Yes | □ No | |||||||||||||
| Condition of the building: | □ Poor | □ Fair | □ Good | □ Excellent | |||||||||||
| Is there sufficient: | □ Display areas | □ Fixtures | □ Infrastructure | □ Work areas | |||||||||||
| □ Office space | □ Storage | □ Restrooms | □ Break areas | ||||||||||||
| □ Shipping and receiving | □ Parking | □ Room to grow | |||||||||||||
| Other features that make this location attractive: | |||||||||||||||
| The length of the lease is: | |||||||||||||||
| The total cost per month | (including utilities, security, insurance, etc.) is: | ||||||||||||||
4. The income levels in this area are:
a. Lower
b. Middle
c. Upper
5. The three major types of businesses in the area are:
6. The number of new businesses opened during the past year is:
7. “Anchor” tenants and other major draws to the area are:
8. Name, address, and proximity of each competitor:
a. ---------------------------------------
b. ---------------------------------------
c. ---------------------------------------
9. For each potential location, answer the following:
| Traffic area: | □ High | □ Low | |||||||||||||
| Easy access to: | □ Transportation hubs and freeways | □ Bus lines | □ Pedestrians | ||||||||||||
| Adequate signage? | □ Yes | □ No | |||||||||||||
| Safe from crime and other hazards? | □ Yes | □ No | |||||||||||||
| Condition of the building: | □ Poor | □ Fair | □ Good | □ Excellent | |||||||||||
| Is there sufficient: | □ Display areas | □ Fixtures | □ Infrastructure | □ Work areas | |||||||||||
| □ Office space | □ Storage | □ Restrooms | □ Break areas | ||||||||||||
| □ Shipping and receiving | □ Parking | □ Room to grow | |||||||||||||
| Other features that make this location attractive: | |||||||||||||||
| The length of the lease is: | |||||||||||||||
| The total cost per month | (including utilities, security, insurance, etc.) is: | ||||||||||||||
Make sure you understand and agree to the following:
□ The length of the lease. You want it long enough to establish your business, but not so long that you are locked in if your venture doesn’t work out. A year or two with an option for a renewal is a good idea.
□ The lease payments. Getting one or more months free is not unheard of when signing a long-term lease.
□ Gross or net lease. Determine whether the lease will be gross or net. A gross lease is one where the landlord pays for taxes, insurance, janitors, and utilities.
□ Cap increases. Be sure that your lease limits the amount your landlord can increase your rent. Five percent a year is typical. What are the terms of the renewal?
□ Bail-out clause. Especially in a retail lease, make sure that the agree-ment allows you to get out of it if your sales do not reach a predeter-mined level. Similarly, a cotenancy clause allows you out of the contract if an anchor tenant nearby leaves.
□ Other obligations. Make sure you understand all of your obligations under the lease.
Do not sign any commercial lease without having an attorney review it, period.
The Bottom Line
Both choosing a name and picking a location are double-edged swords. Sure it’s fun, but a mistake in either area can doom your business. Your name should reflect your business and be mem-orable. Your location must be chosen with care, be affordable, be zoned properly, and be accessible to your customers.
