Can You Start the Same Business as Your Employer? Yes! Here’s How

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 employer. 

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.

I will 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 collaborate with your current employer.

Considerations for Starting a Business in The Same Industry as Your Employer

Non-compete agreements

The first consideration is determining if you are in a legal contract with your current employer to not participate in your industry, generally called a non-compete agreement or an employment contract.

Some non-compete agreements are fair, but some contracts are non-enforceable due to the overreaching scope of these agreements to limit your rights. For example, employers have the right to protect their business assets and accounts.  Plus, you 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. 

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,  communicate with your employer and industry contacts to succeed in your new venture. 

Read more about the limitations of non-compete agreements in your state

Implied Obligational Contracts

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 keep the lines of communication open and forthright.

Ethical Issues

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 is not ethical to steal existing customers from your employer, either by undercutting prices or dishonest actions.  While it may be tempting and seem like a business shortcut is extremely detrimental to your new company and personal reputation – and not necessary either! There is plenty of commerce for all concerned.

Indeed, it is 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 during business hours for your startup, take an approved break and sign out of the office first. 

Additionally, it is unethical (and often illegal) to steal secrets such as formulas, business processes, and databases. So please, don’t fall into the fear trap and think there are no opportunities for entrepreneurs in your industry.  There are always new customers, demands, and market shifts for savvy entrepreneurs to capitalize upon.

Personal Reputation

The next area to consider is your reputation in your community, among customers, and in your industry.

Industry reputation

Every industry is made up of businesses that were started by employees of other companies.  It is a common occurrence for employees to start new companies.

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 will also communicate your integrity to important industry partners who could become investors, customers, and sources of referral business.

Customers perception

You will want to have a prepared statement to share with customers who remember you as an employee of your prior boss.  Try saying something simple such as; “I have chosen to start my own business to follow my entrepreneur dream to better support your family.”

Do not at any time criticize your prior employer. Instead, speak about the positive benefits and features that you can offer to customers. Always says, “I wish them well.”

Do NOT steal existing customers from your employer.  If people contact you for orders, that is a different scenario.

After you secure the order with a prior customer, contact your employer 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.

If you poach customers, they will remember your underhanded tactics and assume that you will cheat them too!.

Community  awareness

Many small businesses are part of the larger community, especially in small towns.  As such, you want to be sure that your community awareness is positive for your family and neighborhood relations.  You can do this by clearly communicating with your current employer and only speaking positively about their products and services.

Be sure to have a standard response to why you left your employer to start your own company? For example, I like the simple statement such as, “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.” 

Business Tips to Starting a Business in Your Current Industry

Now let’s cover some of the best business practices of carving out opportunities in your current industry.

The business world is large, expansive, roomy, and has plenty of space for new companies, services, and products such as yours if you use these proven strategies.

Carve Out Market Share

To differentiate your business from existing companies, such as your current employer, focus on a different market segment. For example, if your employer sells primarily business-to-business B2B, you could sell directly to consumers B2C.

Get creative and brainstorm new ways to market your products and services to a different marketplace segment.

Market to a Subset of Customers

This strategy is where you focus on a different set of customers than your current employer.  Such as if they are selling primarily to women, you could repackage the same services and focus on marketing to men, teens, or kids.  Or, if they are 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. 

Open Different Location

How about opening a new location serving a different neighborhood than your current employer.  These would be new customers who would not be shopping at your employer’s existing site because it is too far away from them.  Additionally, consider virtual real estate; thus, if your current employer is not selling online, you could sell products on websites or social media.

Introduce Specialty Services and Products

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.

If you work in a salon that does not offer nail services, go ahead and start your own nail salon business.  Check out my brilliant names 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.  If you want a cute name for your cake business, check out my list of the best bakery name ideas.

Remember also to read my how to start a bakery step-by-step here

How Your Boss Can Help You Start Your Own Business

True entrepreneurs take complex problems and create innovative solutions.  Here are some ideas that are a bit unconventional but are proven to be profitable for savvy entrepreneurs. 

They are ways to start the same business as your employer creatively, so you can both prosper together.

Partner with Your Employer

Join forces with your employer to bid on projects together or offer your new company’s services as a subcontractor to your boss.

Truly one of the most innovative ways to get started in 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.

Subcontract Your Services

Another way to work together with your existing employer is to become a subcontractor for specific services. For example, I know of a few 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.

Many business consultancies have started just this way –  by becoming a vendor to their existing employer by offering specialty services from their new firm.

Get Customers Referrals

Ask your employer to refer customers to your new company that they cannot service.  They may need to refuse their orders either because of their overbooked schedules or special requirements. 

Here is an excellent way for you to get your first customers. There is a demand since customers are searching for providers.  As you become more established in your firm, be sure to refer customers back to your prior employer to return the favor.

Purchase Their Business

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.

Learn more in my article about the pros and cons of starting a business from scratch

Establish a Satellite Office or Expand Their Product Line

Think collaboration – not competition. Go ahead and open a satellite office for your current employer as your own firm.  Often this is structured as a division of the existing company. 

Indeed 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.

Investors to Fund Your Startup Ideas  

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.  It is an often successful approach to funding startups because they know you, your talents, and your work ethic and are keenly aware of the opportunities in your industry.

Sell Your Employer Your New Business Idea 

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.  A brilliant approach to get started as an entrepreneur. 

Learn how to sell your business ideas to a company in my article with tips and tactics here.

How to Tell Your Boss You’re Quitting (to Start Your Own Company)

As you get ready to start your own business, here are some pointers on how to build bridges rather than destroy them.

Good timing is critical

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.

Tell them that it’s about your goals and objectives.

Make sure your employer understands you’re leaving to pursue your objectives in business, not because you’re unhappy.

Say thank you and express appreciation for your job

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.

Tell them why this will benefit both of you in the long run.

Especially if you’re starting a business that will provide products or services that are supplementary to, rather than in direct competition with, your employer’s offerings, your departure may be mutually advantageous.

Consider joining together to provide a more comprehensive set of services to their customer base. Use the ideas in this blog post to become collaborators instead of competitors.

Keep your communication lines open

Recognize that you might inadvertently leave the firm in a bad situation because of your departure. For example, your employer’s business might suffer due to a void in expertise and experience.

If this is the case and you and your employer (or whoever takes over your position) are parting on amicable terms, consider volunteering your services if they need help or advice.

Obviously, you’ll need to establish some boundaries. Set clear expectations at the start so that you aren’t constantly pestered with phone calls and emails as you work to develop your business.

Don’t violate any non-compete or confidentiality contracts

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.

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.

It is wise to take the time to communicate with your existing employer about any new business plan, even if it’s a surprise to them at first.

Their first response may be one of surprise, defiance, aggravation, grief, or even rage.

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.

Now that you’ve read through this blog post and learned about the legal, ethical, and business reasons strategies and tactics on starting the same businesses your employer, you are ready to launch your firm. 

Remember that while your employer has been generous and supportive as boss.  You still have the right to pursue your livelihood and use your experience and talents to make money. 

Please don’t let jealousy, fear, and petty grievances rob you of your entrepreneurial dreams. Instead, use the advice in this blog post to go forth and become a business owner.  Good luck, Mr, Ms, or Mrs, entrepreneur!

Disclaimer: The content on this page is for informational 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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