How to Handle Employees with Entrepreneurial Dreams of Their Own

Imitation is the sincerest form of flattery. Why you should help staff set up shop for themselves

Written by Advisory Board

Welcome to Advisory Board, a weekly department in which a panel of experts—made up of entrepreneurs and professionals—answer questions you have about how to run your business better.

This week, a reader asks:

“One of my best employees recently informed me that she’s leaving to start her own company in a line of business that I have explored but never gotten into. She wants me to invest in her business and serve as an advisor. Do I make the commitment and write off that market for my own company, or decline and reserve the right to be her competitor in the future?”

Here’s what the experts have to say.

€¢ €¢ €¢ €¢ €¢

“It is extremely difficult to find great employees, so to lose one who will become your competition in a sector that interests you would not be advantageous. Do you have a solid confidentiality and non-compete? If your business models and missions align, then you could explore a venture together.”
—Christine Faulhaber, President and CEO, Faulhaber Communications, Toronto

€¢ €¢ €¢ €¢ €¢

“She’s going to go one way or the other. She’s got the skills to do a good job and succeed, and given that she has identified the market and made a decision she’s probably done a great deal of work in considering the needs of the market—something you’re just peripherally interested in. She’s done all the work that you’d have to do to even consider entering the market. I’d back her, and aggressively support her. Don’t look at it as a lost market, but as gravy—margin you would not otherwise get. In the long run she may find she needs more help, and you’ll be ready to buy her back out.”
Charlie Reid, Charlie Reid & Associates, Kingston, Ont.

€¢ €¢ €¢ €¢ €¢

“Best not to stand in the way of entrepreneurship. It sounds like a reasonable offer assuming it is at least tangential to what your company does now. If your company makes the investment rather than you personally, there could be all sorts of cross-selling opportunities. A win-win.”
Randall Litchfield, CEO, Inbox Marketer Corp., Guelph, Ont.

€¢ €¢ €¢ €¢ €¢

“Being supportive is important in a case like this but only if you really believe in this person and in the strength of their business plan. If you do, then you should definitely consider investing and serving as an advisor. Perhaps you could invest with the condition that you will have first right of refusal if she ever decides to sell.”
John Wilson, founder and CEO, CEO Global Network, Toronto

€¢ €¢ €¢ €¢ €¢


Do you have a question you’d like answered? Email us and we’ll put it to the experts. Have any advice to add to this list? Share your thoughts using the comments section below.

Originally appeared on PROFITguide.com