How to launch your start-up--without losing your day job.
Mike Officer leads a double life. By day, he is a senior software developer at a financial services firm in San Francisco, where he creates, tests, and debugs sophisticated computer applications used by some of the world's largest financial institutions. But evenings and weekends, Officer changes hats and becomes CEO of Carlisle Wine Cellars, his six-year-old Russian River valley winery.
A typical day goes something like this: The 41-year-old Officer wakes at 4 a.m. and commutes to his office, where he works on code until 4 p.m. He's home for dinner by 6, and after putting his two children to bed, spends at least three hours answering e-mails, writing newsletters, fine-tuning his customer database, and analyzing the acidic content of his wines. Sales calls? They often happen during his lunch hour. "I'll drop off bottles for a sommelier during my break," he says. "But I can't stick around to answer questions and be absent from my desk for hours."
It's a complex juggling act. But somehow, Officer pulls it off. In 2003, Carlisle produced 3,500 cases, and esteemed wine critic Robert M. Parker Jr. described the winery's Zinfandels as "magnificent," "prodigious," and "compelling." Still, Carlisle has barely become cash-flow positive, and Officer is not yet ready to quit his day job.
His experience is a common one. Venture capitalists and angel investors may get all the hype. But in the vast majority of cases, a start-up must demonstrate real results, including a solid customer base and sales, before most investors and even bankers will bother with them. "Business schools and business-plan competitions give would-be CEOs the incorrect impression they can get formal funding before even opening their doors," says William Bygrave, a professor of entrepreneurship at Babson College. Instead, most first-time entrepreneurs have little choice but to use their salaries as seed capital.
What do you tell your employer or co-workers? Do you call in sick when you have a client meeting?
But balancing a start-up with a day job can be quite a trick, fraught with all sorts of difficult questions: How much do you tell your employer or co-workers? Do you call in sick to meet with potential clients? By trying to do two things at once, don't you run the risk of doing both things badly? Officer has headed off some of those questions by being perfectly up front with his employer. A longtime hobbyist who only began selling bottles commercially in 1998, Officer now owns 11.5 acres of old-vine Zinfandel in Santa Rosa and leases a small vineyard. Officer's supervisor, Mark Pahlavan, accommodates his employee, allowing him to work at home on Fridays and take vacation days at a moment's notice during harvest season. Officer holds up his end of the bargain by staying available by phone for emergencies at all times. "He's a proven performer able to balance his position here with his private life," Pahlavan says. (Citing corporate policy, both men declined to name their employer.) The company even insisted on buying Officer's wines for a holiday party.
Officer may not have to worry about his boss. But his double life presents no end of other quandries. He's careful to keep production levels manageable, and hired a full-time wine expert in 2001 to oversee the winemaking. He also outsources what he can. Instead of muddling through government regulations concerning alcohol sales, for example, he farms the task out to a compliance company. He's also enlisted his family members. Officer's wife, Kendall, telecommutes Monday through Thursday, which helps cut down on child-care hassles. She contributes financial expertise to the wine business, and the whole family spends vacation days "in the grapes," Officer says.
If it's possible, it's smart to be up front about a side business, as there are few if any legal protections for entrepreneurial moonlighting. With the exception of union members and top executives, most workers have an "at-will" relationship with their employers. "Unless there is a specific condition limiting their discretion, employers can fire workers for simply not liking what they do--in- or outside of work," says Reuel Schiller, a professor of employment law at the University of California's Hastings School of Law.
What's more, entrepreneurs who want to keep their day jobs should carefully examine their employment agreements, says Sharon B. Bauman, a partner in the employment and labor group at Manatt, Phelps & Phillips in Los Angeles. Many employers "make you give up the rights to anything done or created on company time or company equipment," including PCs, software, and computer networks, Bauman says. Run afoul of such a policy, and you risk not only being fired, but losing control of your business. Moonlighters also need to be careful about conflict-of-interest and noncompete policies. In other words, you shouldn't expect to stay hired for long if your start-up sells the same stuff as your employer. Some corporations, like IBM, have policies that prevent employees from using their hired status to market their start-up endeavors.
But in many cases, double-timing entrepreneurs have little choice but to operate undercover. Kate Stein launched her start-up, a Boston-based maker of humorous headgear for women called Over the Top Tiaras, while working in promotions at the search engine Lycos, keeping her venture secret for half a year. "Management generally frowned on that kind of thing," says Stein, who feared losing her rapidly deflating Internet job. On the other hand, the slowdown left her restless. "I was bored, getting out of work early most days," she says. "But my own business was exciting--and a backup plan in case there was no turnaround."
So Stein maxed out her vacation days to attend trade shows and took advantage of her colleagues' technical expertise to help build her website. For economic reasons, Lycos finally laid her off this past August. But Stein wasn't particularly troubled by the news--the tiara business was finally getting to be too much to handle part-time, anyway. "I couldn't keep up with orders, production, and all of that in my off-hours," says Stein, 31. "I was constantly exhausted, with no time for a love life, walking my dog, or even taking a nap." She's since found free desk space at a friend's office, increased her product line from five to 15 designs, and doubled her sales. The only downside? Having to pay for her own health insurance.
Some bosses actually appreciate employees who show entrepreneurial spirit. Sean Montgomery co-founded Integrity Staffing Solutions, based in Newark, Del., on the sly while working as director of operations at a large credit-card services company. It helped that his co-founding partner had no day job and was able to work full-time on the start-up, while Montgomery's salary paid both of the men's living expenses. But it still took Montgomery six months to cut the cord. "Spreading the workload across a bigger team and opting to get more sleep is probably a good idea for the moonlighting entrepreneur," he says.
Now, Integrity has clients like Amazon.com and 95 employees. As it happens, a couple of them are running their own businesses on the side, including another staffing company and a bakery. Montgomery has no objections. "We need to agree on work expectations and schedule demands," he says, "but there's no reason I can't be supportive of entrepreneurs." In fact, he wants his employees to succeed as entrepreneurs. After all, if their businesses take off, they just might become customers.