Last post I talked about Personal Goodwill. A name can create Goodwill for a business. Whether that the goodwill is personal or enterprise, depends upon the circumstances of each business.
When people start their own businesses, many decide to incorporate their name into the business for all sorts of reasons. It can make it easier to go sell and generate new business when you are selling yourself and the business as one. For some people there is a little bit of ego involved. For others it is a way to capitalize on their person reputations.
While these are all valid reasons to use your name in the business name, you should consider using a name the will belong to the business to build the most value.
Branding a business can be difficult because it requires that you work to market the business separate from the owner. There are times when an owner or manager’s presence is so strong that it becomes difficult to separate the brand name from the key person. Just look at Apple Computers and Steve Jobs. When he announced taking a indefinite leave of absence in January, Apple’s stock went down in value. However, in order to keep the value in the business, Apple will have to prove that the company has the ability to keep generating profits without Steve Jobs.
Likewise, business owners who understand that making themselves dispensable to the business is the best way to build value. A business that has profits has value to the owner and potential value in the hands of others. It is the ability to transfer the assets, including goodwill, that generates value in the hands of others.
So while it may be tempting to name your business Smith Manufacturing or Jones Consulting, consider how the name will impact the businesses ability to survive you and be passed on to others.
If you have questions about this or other valuation matters, please contact me.
©2011 Florida Business Valuation Group
