Business start-ups are being warned of the lure to name their enterprises after themselves.

For decades it has been accepted that a business carrying the founder’s name allows customers to personalise their experience with the brand. Mega-companies like Woolworths, Coles, Myers, and Dick Smith have been the standout successes.

But there is a catch.

Should the founder wish to sell the business they’ve built they will be selling the reputation, not only of the business, but of their name.

And this comes home to bite when a non-compete clause is part of the purchase deal.

Most entrepreneurs who sell their businesses gravitate back to what they do best. But with a non-compete clause they cannot capitalise on their own brand or name.

Not so for a more generally named business.

Dick Smith, for instance, founded the business that carries his name and image back in 1968 and sold it to Woolworths in 1982. He eventually was able to use his own name to create a range of foods, but he had to tip-toe through a legal minefield to do so.

The buyers of businesses need to be protected from the outgoing owners in three key areas: Their interaction with customers, staff, and suppliers. That doesn’t leave a whole lot of wriggle room for an outgoing business owner who finds him/ herself bored and thinking about returning to the action.

The outgoing owners are all but banned from ever working or setting up a competing business ever again in this area.

Should they try, their success is uncertain, but their legal costs are punitive.

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