Wondering if you can start the same business as your employer? This blog post will answer all your questions about launching the same type of business as your boss.
Consider all these issues if you plan to start your business on the side part-time while working full-time or if you want to quit your job to launch your startup.
In this guide, we’ll cover the legal, ethical, and business strategy issues and give you many creative ideas to prosper in your new business. Use these business ideas to start a better business than your employer, compete fairly, or even collaborate with your current employer.
Starting your own business while still employed can be a delicate balancing act. It’s essential to navigate your employment contracts and company policies carefully to avoid any potential conflicts of interest or breaches of contract.
Transparency is also key. Consider discussing your plans with your employer to avoid misunderstandings and to maintain a positive relationship. This conversation can help set clear boundaries and expectations, ensuring that your personal business activities do not interfere with your job responsibilities.
If you’re considering building a competitive business, it can be helpful to consult with a lawyer specializing in employment law. They can help you understand the legal implications of your situation and advise you on the best course of action. This legal guidance is essential to ensure that you’re not inadvertently breaching any terms of your employment contract.
The first consideration is determining if you have signed a non-compete agreement with your employer, stating that you won’t participate in the same industry as them. Non-compete agreements exist within employment contracts to help protect intellectual property and trade secrets.
Some non-compete agreements are fair, but some contracts are non-enforceable due to the overreaching scope of these agreements to limit your rights. While employers have a right to protect their business assets, you also have the right to use your business experience and talents to earn a living.
Check your employment contract for the specifics of your non-compete obligations. Additionally, be aware of any post-termination restrictions that your former employer may impose, which could include non-compete clauses that extend beyond your employment period.
If you have not signed a non-compete agreement, you are entitled legally to start a business in the same industry as your employer. Use the tips in this article to navigate this situation successfully, including how you can carve out a section of the market and communicate with your employer and industry contacts to succeed in your new venture.
An implied contract is an enforceable legal obligation that develops out of words, actions, or circumstances. In little ways, implied agreements are established every day, such as agreeing to receive goods or services in exchange for payments.
The implied contract of being an employee of a particular company within an industry activity is that you are bound to support your employer’s goals and company mission statement during the time you are paid for your services.
However, there is plenty of room for your new venture and their business to both succeed in most industries. As long as you differentiate your firm, as we will discuss below, you and your old employer can have thriving businesses.
Now that we discussed the legal, contractual issues, let’s discuss the ethical ones. Ethics are an essential part of life and business, and you want to follow your own set of ethics to live well and happily.
Of course, it’s not ethical to steal existing customers from your employer, either by undercutting prices or dishonest actions. While it may be a tempting business shortcut, it’s extremely detrimental to your new company and personal reputation – and not necessary either. There’s ample business to go around.
It’s also unethical to perform tasks for your own business while being paid as an employee during business hours. Don’t do this under any circumstances. If you need to respond to emails or make calls for your startup during business hours, take an approved break and sign out of the office first. Additionally, it’s unethical (and often illegal) to steal secrets like product formulas, business processes, and databases.
The next area to consider is your reputation in your community and within your industry.
Every industry is made up of businesses that were started by employees of other companies. It’s a common occurrence for employees to start new companies. If you go this route, protect your reputation by communicating honestly and kindly with your current boss, industry contacts, and prospective customers.
Your positive actions will help you feel good about yourself and your business. It’ll also communicate your integrity to important industry partners who could become investors, customers, and sources of referral business.
There’s a good chance customers might recognize you as an employee (and now competitor) of your prior boss. Knowing what you’ll say to them if they ask questions will help avoid awkward conversations. For example, you could say, “I’ve decided to start my own business to follow my entrepreneur dream to better support my family.” Another go-to could be, “I enjoy this type of work so much that I wanted to become more involved and start my own business to better support my family’s future.” It’s simple, non-confrontational, and honest.
Don’t criticize your prior employer in front of customers (even if you had valid complaints). Instead, acknowledge that you wish them well, and focus on the positive benefits and features that you’re now able to offer your customers.
Additionally, don’t intentionally steal existing customers from your employer. It’s a completely different scenario if a customer contacts you directly, though. If that happens, consider contacting your former employer to let them know the situation: that this person called you directly and how you handled it. If you manage this tactfully, don’t be surprised if your boss gives you some business tips on handling that customer more easily.
Now let’s cover some of the best business practices of carving out opportunities in your current industry. The business world is large; there’s plenty of space for new companies, services, and products such as yours if you use these proven strategies.
To differentiate your business from existing companies, such as your current employer, you could focus on a different market segment. For example, if your employer sells primarily business-to-business B2B, you could sell directly to consumers B2C. Or, you could get creative and brainstorm new ways to market your products and services to a different marketplace segment.
This strategy is where you focus on a different set of customers than your current employer. For example, if your old employer sells primarily to women, you could repackage the same services and focus on marketing to men, teens, or kids. Or if they’re selling to residential homeowners, perhaps you could market to commercial landowners or store retailers.
Think about subsets of consumers that want and need your products and services. Many new companies have been created just this way.
Another strategy would be to open a very similar business, but lay your roots in a different neighborhood than your current employer. With this approach, you’d serve entirely unique customers who wouldn’t shop at your employer’s existing site because it is too far away from them.
Another approach is that of virtual real estate; if your current employer doesn’t sell online, you could sell products on websites or social media. In contrast, if your employer sells online, you could start a brick and mortar location to serve customers who prefer to shop in person.
Another creative strategy to separate your new company from your employer is to focus on specialty products and services not offered in your current employer’s menu.
For example, if you work in a salon that does not offer nail services, go ahead and start your own nail salon business. Check out some of our favorite name ideas for nail businesses here. If you work in a bakery that does not offer custom cake designs go ahead and branch out to one-of-a-kind specialty cakes (and find your perfect bakery name idea here).
True entrepreneurs take complex problems and create innovative solutions. Here are some ideas about collaborating directly with your current boss. These might be a bit unconventional, but they can definitely be profitable opportunities for savvy entrepreneurs.
Here are some ways to start the same business as your employer creatively, so you can both prosper together.
Join forces with your employer to bid on projects together, or offer your new company’s services as a subcontractor to your boss. This is a great approach for employees at small businesses who know that their boss wouldn’t be able to replace them easily.
While asking your boss to team up with you might seem like a gutsy move, it can be a great way start your own business without having to use lots of working capital. Also, you can team up with people you know and trust based on your excellent current working relations.
Another way to work together with your existing employer is to become a subcontractor for specific services. For example, some construction companies that hire their employees for specialty services such as pressure washing, masonry work, construction cleanup separate from their daily activities as company employees. Those same employees are also able to serve their own clients on the side.
Many business consultancies have started just this way, becoming a vendor to their existing employer by offering specialty services from their new firm.
A different way to start the same business as your employer is to buy their company! Buying a business is typical, where trusted employees or managers purchase an existing firm from an owner retiring or moving on to other projects. This is ideal if you don’t like the cons of starting a business from scratch.
Sometimes, collaboration is better than competition. You could consider opening a satellite office for your current employer as your own firm. If you go this route, you’ll probably be structured as a division of the existing company.
This can be a win-win situation for both you and your boss. You can begin your entrepreneurial venture with the backing of an established firm, and they get an experienced, committed manager expanding their territory, reducing their risk and capital outlay.
Additionally, many firms want to expand their product or service menu but don’t have the funds or personnel to make it happen. You could offer to become a division of their corporation and take advantage of those new opportunities as an entrepreneur.
Yet another smart way to start your own company is to use your employer’s capital to fund your startup. Ask them to be your initial investors. While it might seem counterintuitive to ask them for money, it can be a win-win situation, especially if you aren’t directly competing with them. You’ll get startup capital, and they’ll benefit financially when your business succeeds. They also know you, your talents, and your work ethic, making you a “less risky” investment than other opportunities they might be presented with.
Perhaps you have a bright new business idea that you want to sell to your employer to go forth and manufacture and bring to market. This can be a lower-risk approach to getting started as an entrepreneur if starting out solo sounds overwhelming.
Learn how to sell your business ideas to a company here.
As you get ready to start your own business, here are some pointers on how to build bridges with your employer rather than destroy them.
Schedule a meeting with your employer one-on-one without interruptions instead of surprising them at an inconvenient time to tell them the bad news. Planning an appointment will allow you to get ready for the encounter and assure that you have adequate time set aside to do it justice.
Make sure your employer understands you’re leaving to pursue your objectives in business, not because you’re unhappy. Even if you do have criticisms about their business, now’s not the time to voice them (unless they directly ask and you’re willing to share).
Although some employers are uninterested, most bosses will find the recognition of how they have influenced your life and career professional. Mention how much you appreciate your employer’s leadership and assistance.
If you’re starting a business that will provide products or services that complement your employer’s offerings instead of compete with them, your departure may be mutually advantageous.
Consider joining together to provide a more comprehensive set of services to their customer base. Become collaborators instead of competitors.
Check to see whether you have any employment contracts in place that might prevent you from establishing your own company. If you discover you are subject to a non-compete agreement, thoroughly study the conditions and regulations and consult an attorney to see what your next steps should be. For example, a non-compete agreement may be declared invalid if the time limit or scope is deemed excessive.
Take a hard look at your employment agreement, too, if you signed one. If you violate the terms of an NDA by disclosing your employer’s confidential and trade secret information while establishing and managing your own firm, you might be in legal trouble.
Hopefully, after taking to heart the suggestions above and relying on your interpersonal skills, you’ll be able to help your employer understand and maybe even applaud your choice. But, if that doesn’t work, at least you’ll know you tried to go your separate ways amicably as you start constructing your own business empire.
Once you’ve determined that it’s a smart legal, ethical, and personal decision to enter business in the same field as your boss, it’s time to get going. Launching and growing your business requires careful planning and execution. Start by developing a comprehensive business plan that outlines your goals, target market, and financial projections. This roadmap will guide your business decisions and help you stay focused on your objectives.
Consider seeking advice from a business advisor or mentor to help you navigate the process. Their experience and insights can be invaluable as you launch your business and work to establish a foothold in the market.
When launching your business, it’s crucial to avoid direct competition with your current employer. Focus on a different market segment or niche to minimize potential conflicts of interest. Use your own resources and avoid using company resources to promote your business. This approach will help you maintain a clear distinction between your employment and your new venture, ensuring a smoother transition.
Starting a competing business while employed comes with its own set of challenges. One of the most significant is managing conflicts of interest. It’s essential to maintain a clear distinction between your employment and your own business. Avoid using company resources or confidential information to start your own business, as this can lead to legal and ethical issues.
Another common challenge is managing your time and resources effectively. Balancing your job responsibilities with the demands of starting a new business can be daunting. Prioritize your employment and ensure you’re meeting your obligations. Consider seeking advice from a business advisor or mentor to help you manage your time and resources efficiently.
By understanding the legal implications, protecting yourself and your business, and overcoming common challenges, you can successfully start a competing business while employed. Remember to always prioritize transparency and maintain a clear distinction between your employment and your own business. This approach will help you navigate the complexities of starting a new venture while maintaining your professional integrity.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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