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How to Keep Employees from Becoming Competitors

By: Susan Solovic

 

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Many of you submit questions through my website.  I do my best to respond in a timely manner with information to help you succeed in your business. Recently, I’ve been getting a lot of questions regarding employees who leave to become a competitor so I thought I’d take this opportunity to discuss ways to protect your small business.

 
Eric from Wisconsin wrote that he had successfully grown his marketing business over several years and had reached the pivotal moment where he felt he needed an employee to help him manage his current workload so he could add more clients. Eric’s fear about adding staff wasn’t focused as much on the financial risk as it was the risk of training someone on the unique strategies he used for his clients, then watching the employee take that knowledge and start his own firm or go to work for a competitor.
 
Yes, that can happen and it is a risk every business owner takes. Whether it is intellectual property, a customer list or even something as simple as excellent hands on training, an employee may leave and attempt to take valuable information with him/her. My father groomed a young man in the funeral business, taking him in as an apprentice and teaching him the business for over 20 years. We learned from a family friend that he was in the process of building a new funeral home and was copying files at my family’s business at night. My parents and I confronted him and found out that it was true. We asked him to leave immediately. He cried and said he was sorry, but the damage was done. Fortunately, the family business continued to prosper while the former employee, buried in debt, struggled to build his business.
 
There are two important things to acknowledge. First, you can’t build a successful, sustainable business without a team. I call it the MYTOP theory. Multiply Yourself Through Other People.
 
Secondly: There are unethical people in this world and one of them may end up working for you at some time. It is the risk of building a business. There are, however, a few things you can do to protect your business.
 
Make your company a place where people want to work. Create an environment that is empowering and fun. Give your staff the opportunity to profit as the business profits. Allow them to feel part of the success and they are more likely to remain loyal. When your staff feels a real part of the business, there is less incentive to leave.
 
Ask employees to sign non-compete/non-disclosure agreements as a condition of their employee. Non-compete documents must be reasonable in time and scope, and you cannot bar an individual from making a living except to the extent that it is necessary to protect your business. The extent to which non-competes are allowable varies per jurisdiction so it is a good idea to consult with your business attorney.
 
Some people believe non-competes don’t provide much value, but in my opinion it minimizes the risk of an employee from jumping ship to go to work for a competitor or to start his own business. At least when the employee signs the document, they are aware that there may be serious consequences for actions they take that could cost you business. If my father had asked his employee to sign a non-compete, the employee would not have been able to launch a competing business in the same area. An important lesson learned.
 
This article was originally published by Susan Solovic
Published: July 16, 2014
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Susan Solovic

Susan Wilson Solovic is an award-winning serial entrepreneur, New York Times, Wall Street Journal, Amazon.com and USA Today bestselling author, and attorney. She was the CEO and co-founder of SBTV.com—small business television—a company she grew from its infancy to a million dollar plus entity. She appears regularly as a featured expert on Fox Business, Fox News, MSNBC, CNN, CNBC and can be seen currently as a small business expert on the AT&T Networking Exchange website. Susan is a member of the Board of Trustees of Columbia College and the Advisory Boards for the John Cook School of Entrepreneurship at Saint Louis University as well as the Fishman School of Entrepreneurship at Columbia College. 

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