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STREET SMARTS

The Answer Man
 

What do you do when an employee starts a competing business? Nothing, says the Answer Man.

Norm Brodsky is a veteran entrepreneur.

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It's been a long time since I've done a column featuring reader questions, but the questions keep coming, and a lot of them are great. I can't answer every letter and e-mail, but rest assured that I read--and appreciate--each one.

About two and a half years ago, I hired someone to be the operations manager of my courier company. He was the perfect fit for my business at the time. Now, however, the company has outgrown his ability to handle the job. He is still an asset to the team but not in his current position. I would like to keep him on the bus and move him to a different seat, so to speak. It's a tough situation. He is 33 years old and has a family. But I feel I must do something. Any advice?
-Eric

Dear Eric: We all wind up in your situation sooner or later, and I agree--it's tough. You feel guilty because it's your fault. After all, you put the guy there in the first place. In the early years of my company, I tried to deal with the problem by doing what you're suggesting, but things seldom worked out the way I hoped. The issue was compensation. If I cut a guy's salary, he would be resentful and create a whole new set of problems. If I didn't cut his salary, I would become resentful, and that would get in the way of building a team. The point is that you need to think clearly and unemotionally about this situation. If you have another job on the same pay level that the guy is suited for, by all means move him over. But don't do it if his new responsibilities won't justify paying him what he's been getting up to now. It's better to let him go--for the sake of everyone concerned. If your conscience bothers you, give him a big severance package that can carry him until he finds another job.

I am 23 years old and about to start my own business. Is it better to begin with a completely new and unique product, or should I go with an established product and rely on a new approach to selling it?
-Kevin

Dear Kevin: Unless you're the next Bill Gates or Fred Smith, I'd recommend that you go with an established product. I generally prefer to start with a concept that's been around for 100 years or more. Okay, maybe less than 100 years, but I want it to be something that everybody understands. That's one of my three criteria for choosing a business to go into. Why? Because it takes a ton of money to educate a market, which you have to do if your product or concept is really new and unique. At the same time, however, I want to be in an industry that's antiquated, by which I mean that it's out of step with its customers. Maybe companies haven't kept up with the latest technology. Maybe customer needs have changed, and suppliers haven't adapted. By taking a different approach, you can create a niche for yourself, which is my third criterion. Of course, if you're a true business visionary, you should ignore my advice. Go ahead: Change the world. But most people have more modest goals. For them, I recommend a 100-year-old concept, an antiquated industry, and a niche.

One of my salespeople recently resigned and started his own company competing with mine. I subsequently learned that he had been conducting his new business on the side while he was still working for me. What should I do?
-Vennie

Dear Vennie: You should do nothing. Keep building your company and forget about the guy. Don't let this incident cause you to lose focus on what's really important to your business. People waste a lot of time and energy worrying about ex-employees who become competitors. I've had 10 or 12 people leave and go into competition with me. Two of them made the Inc. 500. I'm happy for them. When employees start competitive businesses, I send them a good-luck note and a plant. Of course, the plant is a cactus, but I don't spend an instant worrying about them, and I don't lose my focus. Maybe you'll be more alert the next time an employee sets up a business on the side, but this guy should be history as far as you're concerned. Rest assured that if he's an unethical person, he'll eventually get his comeuppance.

I read with interest your column about paying salespeople by salary rather than commission. [See "The Sales Commission Dilemma," May 2003.] My question is, how do you decide on raises? I suspect you must use subjective criteria. If you based raises only on objective sales results, it seems as though you'd undermine the team concept you're striving for.
-Robert

Dear Robert: You're right. Part of it is subjective. I look at the increase in overall company sales and at individual performance. Clearly one factor in evaluating individuals is the number of accounts they close, but more important to me is the way they work as a member of a team. I want to see people helping each other, not competing with each other. One of our salespeople, Patty, recently had to go out of town and asked another salesperson, David, to attend a meeting with a big account she'd been trying to land. Much to everyone's surprise, when David showed up, there were six people waiting who said they were making the final decision that day. He closed the account, and I give him full credit for that, but I also give three stars to Patty for being able to say, "I trust the people I work with to cover for me."

I've had the entrepreneurial bug since I was in college 15 years ago. Now I'm happily married with two sons. Those relationships bring joy and meaning to my life, as well as a lot of responsibility. For that reason, I plan to keep my day job as an executive of a Fortune 50 company, but I feel I must also honor my entrepreneurial itch. I don't want to go through life without having been part of the creation of a business. I have a great deal of experience and knowledge that I feel would be useful to someone launching a new venture. I'm thinking about volunteering in a start-up, donating up to 20 hours of my time per week. In return, I'd ask that I be treated like a partner in the business, though one with no salary or equity. Do you think this idea has merit?
-Name withheld

Dear Friend: First, I want to tip my hat to you. You've made a very tough life decision, putting your family obligations first, and I admire you for it. Many people can't do that. And yes, I think your idea has a lot of merit. I also love starting businesses, and I've found that I can satisfy my itch vicariously by helping other people start theirs. For now, volunteering is a good option for you, although 20 hours a week sounds too ambitious. Instead, I'd offer to meet once or twice a week with an entrepreneur to offer advice and serve as a sounding board. You'll be doing a great service, and you'll learn important lessons that you'll be able to put to use when you have your own company--after your children have left home. It's never too late to start a business.

I'm considering going into business as the U.S. representative of a Canadian manufacturer that provides energy-saving products for commercial facilities. I've spent a month checking out the industry, and I'm convinced that the products have money-making potential. I've also checked out the company's references, and they all seem fine. Nevertheless, I'm hesitant to move forward. I don't want to spend the next nine months developing the business and then discover I overlooked something. I've found a company that specializes in fraud investigations. For $800, it would do some additional due diligence on my behalf. Do you think I should hire this firm?
-Ken

Dear Ken: Are you looking for reasons not to go ahead with this business? If so, you should have no trouble finding them without anyone else's help. It sounds to me as though you've already done your due diligence, but you're afraid of making a mistake. Let me assure you that you will definitely make mistakes in your business career. I've made more than I can count. The survivors are people who overcome their mistakes and come out stronger. Yes, the business may turn out to be a flop despite your best efforts, but that doesn't mean that the time you put into it will be wasted. Those months could turn out to be the most valuable of your business life. As for hiring other people to do additional research, I doubt they'll discover anything that you couldn't find by spending a few hours on the Internet. If you haven't done that or checked with the appropriate industry groups, by all means go ahead and do it. Then sit down and ask yourself whether this opportunity feels right. If it does, take the leap. If it doesn't, find another that feels better. But don't sit around agonizing. Your time is valuable. Even if you wind up making a mistake, the sooner you make it--and learn the appropriate lesson--the better off you'll be.

Norm Brodsky (brodsky13@aol.com) is a veteran entrepreneur whose six businesses include an Inc. 100 company and a three-time Inc. 500 company. This column was co-authored by Bo Burlingham. Previous Street Smarts columns are available online at www.inc.com/magazine/columns/streetsmarts/.

Last updated: Oct 1, 2003

Street Smarts columnist and senior contributing editor NORM BRODSKY is a veteran entrepreneur who has founded and grown six businesses.
@NormBrodsky




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