Generally speaking, trademarks serve to protect the exclusive use of your company name, slogan or logo.
A significant number of business owners think that because they have registered a company and reserved a company name with the CIPC, their exclusive right to the name is ensured. The short answer is that this assumption is incorrect. Reserving a company name with the CIPC does not necessarily mean that you have the exclusive right to use that name.
This article seeks to provide you hard-working entrepreneurs and business owners with a better understanding of what a trademark is, why it is needed for your business, and some of the incredible, but not particularly well known, benefits of having a registered trademark.
Know the difference: Trademark versus Reserving
Following on from the company name example above, the register of company/business names and the register of trademarks are two completely separate registers.
For example, Darryl, an enterprising serial entrepreneur, decides to reserve his company name ‘Darryl’s Delightful Doughnuts’, and thinks that because he has reserved his company name, nobody else is entitled to use that name or anything similar. Darryl is wrong.
Darryl doesn’t realise that another Darrel from another province, who has decided never to incorporate his company, but rather to remain a sole proprietor, has registered a trademark for the name ‘Darrel’s Delightful Doughnuts’, and has been trading for five years longer than our Darryl.
What happens years later when the businesses learn of each other
After a number of years of trading, with both businesses growing, Darryl and Darrel eventually learn of each other, and both try to prevent the other from using their respective business names.
Although there are certain exceptions in terms of the law of trademarks, such as honest concurrent users, generally speaking, Darrel, with the registered trademark, and who had been trading for a longer period of time, is principally entitled to use of the name, and could forcibly prevent Darryl from using his version of the name.
What becomes apparent is that when reserving your company name, also do a search of the trademarks’ register, and file for a trademark to avoid suffering the fate of poor Darryl.
Prevent others from cybersquatting by using your brand name
By submitting a registered trademark to the international Trademark Clearinghouse, when a new domain is registered that incorporates your registered trademark, the Trademark Clearinghouse will warn the person attempting to register your domain that it is the subject of a registered trademark, and will also send you a notification informing you that somebody is trying to register a domain containing your trademark, allowing you to take action, and prevent the registration.
1. Licensing of a trademark
Let’s assume that our Darryl did not have an issue with Darrel, and had a registered trademark. Darryl’s Delightful Doughnuts has been growing substantially, to a point where he now wants to franchise the business, and to use distributors and agents to distribute his delightful doughnuts.
One of the primary enabling mechanisms that will allow Darryl to franchise his business effectively, and to allow agents and distributors to utilise his branding, is through the licensing of his trademark, with or without a fee, to his franchisees, distributors and agents.
2. Security for a loan
In building out his franchised business, Darryl also needs to purchase fancy new head offices, for which he does not have the cash flow as yet to purchase himself. Guess what? Darryl’s registered trademark comes to the rescue once again, and can be used as security when applying to a bank for a loan to fund his office expansion.
His trademark has effectively become a standalone asset with intrinsic value, and is not merely regarded as goodwill as would be the case with an unregistered trademark.
3. Google AdWords keyword poaching
I have touched on this topic briefly in a previous article, but it is worth canvassing again due to our ever-growing dependence on pay-per-click advertising through Google AdWords.
Darryl’s Delightful Doughnuts has now been growing exponentially for the past five years, and is well known to a large number of people in South Africa. Eric decides to start up his own business, ‘Eric’s Emphatic Doughnuts’, but feels he would be better suited shortcutting the growing process by leveraging off of the success of ‘Darryl’s Delightful Doughnuts’.
When Eric creates his Google AdWords campaign, he decides to use the keyword ‘Darryl’s Delightful Doughnuts’ to show his, Eric’s, advert.
Because of the high online search volume of ‘Darryl’s Delightful Doughnuts’, Eric’s doughnut business skyrockets, to the despair and dismay of Darryl, who has suddenly lost a significant amount of business due to Eric’s actions.
There is, however, some hope for Darryl, in that Google has a neat utility in which registered trademark owners who are the victim of such ‘keyword poaching’, are able to submit their registered trademarks to Google, which will then remove the offending keyword from the competitor’s AdWords campaign.
This remedy is one that is unfortunately only available to holders of registered trademarks.
I hope that this has given you a better grasp of what a trademark is and how it functions as an effective tool in growing your business and protecting your legitimate interests.
Start-Up Law: I’m A Start-up Founder. Can I Pay Employees With Shares?
Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.
Every early stage start-up company battles with restricted cash flow and not being able to pay market related salaries to their employees. Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.
Can I pay salaries with shares?
South African labour laws require that employees be paid certain minimum wages, and “remuneration”, as defined within the Basic Conditions of Employment Amendment Act, either means in ‘money or in kind’. ’In kind’ does not include shares or participation in share incentive schemes, as determined by the Minister of Labour. As such, there is no room for start-ups to completely substitute paying salaries with shares or share options. However, there is no restriction in topping up below market related salaries with equity via an employee share ownership plan (‘ESOP‘).
Employee Share Ownership Plans
There are a variety of ways in which employees can be incentivised, and it will always be important for the start-up founders to consider what goal they wish to achieve by incentivising their employees.
ESOPs can be structured in several ways, for example: employees may be offered direct shareholding in the company, options for the acquisition of shares in the future; or alternatively, a phantom / notional share scheme can be set up.
ESOPs permit employees to share in the company’s success without requiring a start-up business to spend precious cash. In fact, ESOPs can contribute capital to a company where employees need to pay an exercise price for their share options or shares.
The primary disadvantage of ESOPs is the possible dilution of the Founder’s equity. For employees, the main disadvantage of an ESOP compared to cash bonuses or bigger salaries, is the lack of liquidity. If the company does not grow bigger and its shares does not become more valuable, the shares may ultimately prove to be worthless.
Some key features to consider when setting up an ESOP are:
- ELIGIBILITY – who will be allowed to participate? Full time employees? Part-time employees? Advisors?
- POOL SIZE – what percentage of shares will be allocated to incentivise employees?
- RESTRICTIONS – will employees be able to sell their shares immediately?
- VESTING – will there be a minimum period that service employees will have to serve with the start-up to receive the economic benefit of his or her shares?
Employee share ownership plans are great corporate structuring mechanisms for attracting and retaining employees, as well as fostering an understanding of the company ethos and encouraging loyalty and productivity. It is essential when implementing an ESOP that all the tax implications are considered and that the correct structure and legal documentation are in place.
Beauty Of Failure: The Art Of Embracing Rejection
In this piece I will try demystify failure, and look into why it should be embraced and not feared.
“Chaotic”, “uncertain”, and “rollercoaster” are three words that would effectively describe almost any entrepreneurial journey. If death and taxes are certainties in life, then failure and taxes are the only two guarantees in business.
If failure is (to some degree at least) inevitable, why should we fear it? In this piece I will try demystify failure, and look into why it should be embraced and not feared.
1. It’s Part of the Job
We can start by separating failure into two different categories – micro and macro-failure. If a macro-failure can be considered as the overall failure and shutdown of the business, micro-failures can be seen as the day to day events that go wrong – that potential client that hangs up on your cold call; the sales pitch that gets the soft-no response of “we’ll call you”; the product launch that no one pitched up to. As Mark Manson puts it, business (as in life) is just a process of becoming less wrong over time.
Everything is a hypothesis that needs to be tested, and the process of business is applying the learnings from each hypothesis – each micro-failure – to be less wrong next time to move the business forward.
As Seth Godin says, “The cost of being wrong is less than the cost of doing nothing”. Embrace being wrong. Rejection and failure are part of the job.
Related: The Art Of Embracing Rejection
2. Opportunity to Refine
There is one undoubted truth about every failure – and that is, each failure gives an experience to dissect and learn from. The Roman Emperor Marcus Aurelius had a similar view; that to one person a situation is good, and to another, that same situation is bad – Only perception decides.
As an entrepreneur, it is important to adopt this stoic thinking of managing your perceptions. Look at situations rationally, and perceive rejections as opportunities to refine the product that the market really needs – not the product you are forcing on your market.
3. With each Failure, Fear it Less
One of the great things about rejection or failure, is that the more often you are exposed to it, the less you fear it. In fact, micro-failures can become such a common part of an entrepreneur’s day, that you stop even noticing them as failures at all.
You may look back on a day with multiple rejections from prospective clients as a normal day on the path to building a business. The goal is to get to that point as quickly as possible.
4. One Less Avenue
In the beginning, any failure will elicit a strong emotional response, however, when it becomes embraced as part of the journey, as crazy as this sounds, you may even get excited for the next rejection or micro-failure.
Why? Because each micro-failure takes away one possible path you could go down in your business. Entrepreneurs tend to be highly ambitious, highly idealistic people. This may result in wanting to do too many things, take the business in too many directions simultaneously, and run before walking.
The beauty of failure is it re-clarifies the path, stops the entrepreneurial mind from getting carried away, and brings everything back into perspective. What’s better than pursuing 1000 potential clients? Pursuing 999 higher potential clients.
Eliminate avenues that aren’t right for your business as quickly as possible so that you can spend time on providing best possible product or service for the ones that are right.
5. Practical Tip to Embrace Rejection
So with all this theoretical talk out of the way, how do we get over that fear of failure to see the beauty of it? Start by watching Jia Jang’s TED talk of 100 Days of Rejection: https://www.ted.com/talks/jia_jiang_what_i_learned_from_100_days_of_rejection. The talk genuinely impacted my life. I have since implemented an annual (and much less impressive) 10 days of proactive rejection in my life. The goal is for 10 days, to do anything in any aspect of life that you would do if you weren’t ruled by fear. Ask yourself today, “what would I do if I wasn’t scared?”
The goal is to actively seek rejection to remove the power of fear from damaging your business’s potential.
Finally, I believe we should get our heads around the idea of celebrating our failures. Go for a drink as a team and give a toast to that failure even more than if it was a success. After all, if life is more about the journey than the destination, surely we should celebrate and cherish every event of the journey along the way?
Every event that happens will be critically important in forming the empire of a business that you are building. Take a step back, see the big picture, and smile whenever it doesn’t go as planned. See the beauty of failure.
6 Resources For Start-ups Looking For Funding
Here are 6 online resources that can help you pay the bills and grow your business at the same time.
Anyone who has ever considered starting their own business, or is currently in the process of doing so, knows that every little bit helps when it comes to making ends meet. Part of the charm of start-up culture is the low-budget creative atmosphere that seems to continually fuel innovation. But, eventually you’re going to have to keep the lights on and water running, and you can’t do that with creativity alone.
Whether you are a business that is just starting out, or already well on your way, there are plenty of online platforms that offer start-ups advice and funding opportunities. Here are 6 online resources that can help you pay the bills and grow your business at the same time.
At one point it seemed that anyone with a clever idea could make a video showing why the world should invest in the next big thing. While a lot of crazy projects have gotten funded over the years, utilising a crowdfunding platforms like Kickstarter continues to be a viable way to get your project off the ground. Of course, if you want to reach your funding goals, it’s best that you have already done your market research, have a solid plan, and treat crowdfunding like a global VC.
Visit Kickstarter here.
Those who are new to the start-up world might not know exactly where to start when it comes to looking for funding. While the freelance economy has grown immensely in the last 5 years, it’s important to know where to look.
Platforms like Toptal offer a wide range of freelance professionals that specialise start-up funding. Start-ups seeking a consultant on Toptal can also rest easy knowing that they carefully screen each candidate, ensuring they have the necessary professional background and experience to guarantee a successful project.
Visit Toptal here.
If you couldn’t already tell by the name, appbacker is definitely worth checking out if you are a start-up working in app technology for both Android and Iphone. The platform helps people discover different apps through the crowdsourcing model. Investors can scroll through apps from around the world, and if they like what they see, they can choose to invest. Funding incentive is based on an investor’s ability to purchase an app at the wholesale price, eventually making a profit once the app starts flying off the shelves in the official app store.
Visit Appbackr here.
Investors are more likely to invest locally, which is why Gust is an attractive option for start-ups around the world, as they represent over eighty countries worldwide. Founded by a team of investors and lawyers, Gust knows their way around the start-up world.
With portals for both start-ups and investors, the platform seamlessly connects those seeking funds and those looking to invest. Start-ups can create a profile on Gust, and also have access to tools and tips to help them regulate finances and legal matters.
Visit Gust here.
Not just for investment, although that is a major part of the platform, AngelList is also a great place to find start-up jobs as well as recruitment. Those start-ups that are looking to expand can greatly benefit from this feature, while also getting their name out there to potential investors.
Their syndicate platform, led by technology experts make room for those who are looking to invest the chance to apply to a lead or directly invest in a fund.
Visit AngelList here.
From top corporations to big name accelerators, Seedrs aims to simplify the funding process for investors. Providing a vast network of investors from 48 different countries, who tap into an additionally impressive network of start-ups, there is plenty of room for collaboration on this platform. Seeders also encourages investors and start-ups to continue their relationship after the transaction is made. Their online and offline networks aim keep both start-ups and investors in the loop.
Depending at what stage of development your company has currently reached, exploring various funding options available to you is a worthwhile endeavour. Rather than blindly pitching investors, investigating each potential platform, whether it’s crowdfunding or a hiring a freelance funding expert, will save you time and resources so you can focus on the right type of investment based on your needs.
Visit Seedrs here.
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- Leadership: What Is Your Why? (Read Purpose)
- Start-Up Law: I’m A Start-up Founder. Can I Pay Employees With Shares?
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