Starting up a business secretly

[chahoo]

Hi there, i am currently employed but i am thinking of setting up a business whilst working for my employer which will be classed as a conflict of interest.

I have a customer who is currently buying goods from the company i work for but is willing to order from me direct if i can be more competitively priced than my employer and i am contemplating setting up a company to make extra money for myself. I estimate i can make about £50k in the first year but still want to stay employed as well.

Obviously i need to keep this secret but if i set up a ltd company then i will have to be named at companies house and if i go sole trader i think i will not get business as my customer is a blue chip company and i cannot see them signing cheques with ***trading as.

if i go ltd can i set up the registered office as a po box or does it have to be a real address.

also i am a discharged bankrupt so again does anyone have thoughts on the banking side of things. I will probably have to give a personal guarantee to my supplier but would rather not.

All feedback appreciated

 

[Cornish Steve]

A few things.

1) Check your contract. You may well find you are legally prevented from setting up in competition - especially while you are working but also for a period of time after you leave.

2) Before starting out in business, put together a business case. Right now, you're thinking about starting up based on one customer whose actions are somewhat dubious (effectively undermining an existing supplier relationship).

3) In general, you can't keep things secret. If your business is to be a success, you need publicity. OK, you don't have to flaunt your business before you launch, but you have no option after that.

Unless, of course, you're just trying to make some money on the side. If that's the case, why risk your job and reputation over one shady deal?

PS - if I was your employer and found out about this, I'd not only fire you on the spot but I'd also sue you for lost business.

 

[chahoo]

Hi Steve i take on your point and to be honest i only want to make a bit of cash on the side as i will only get a small percentage of the profit and i have created the existing customer relationship, so i want to make some cash out of it.

Does anyone have any advice on setting up the business?

 

[Rhyl Lightworks]

i have created the existing customer relationship,

Isn't that what you're paid for?

Barrie

 

[Planck]

to be honest i only want to make a bit of cash on the side as i will only get a small percentage of the profit and i have created the existing customer relationship, so i want to make some cash out of it.

But you are making cash out of it, your salary. You are performing the job your employer pays you to perform.

What you are suggesting is unethical and may well be against your contract. I second Steve - if one of our employees did this, I would not hesitate to sue them.

 

[cheaputils]

Go ahead and do it. You will be found out and sacked for gross misconduct. You will have breached the trust of your employer, your contract of employment, and any other reputation you have with other suppliers, who will refuse to deal with you in future. My employer pays me a good salary. I know I have a conflict of interest clause in my contract. I wouldn't dream of jeopardising that for a quick buck with a dodgy supplier. Imagine a scenario in the future when he tries to screw you on price and threatens to tell your employer when you don't give him what he wants. You'll put yourself in a very, very, very, very, very vulnerable position.

Short Term Gain = Long Term Pain

 

[GRDCredit]

I estimate i can make about £50k in the first year

i only want to make a bit of cash on the side

:|................

 

[benjamin_c]

:|................

i was confused about that too tbh!:|:| if £50k is a "quick buck on the side" to you, then your boss obviously pays you very well indeed.

 

[chahoo]

thats my point i make min £1m turnover with minimum £300k profit per year, all self generated and get paid £30k so i hope you can you see where im coming from.

On the other hand i can see exactly what you guys are saying and feel that i am wrong to be thinking of this.

I think i should talk to my employer about my salary instead of what is realistically stealing from his business.

any advice on what sort of salary i should be earning bearing in mind the profit i return.

Thanks for the advice and the tough talking i really appreciate it

 

[Planck]

thats my point i make min £1m turnover with minimum £300k profit per year, all self generated and get paid £30k so i hope you can you see where im coming from.

On the other hand i can see exactly what you guys are saying and feel that i am wrong to be thinking of this.

I think i should talk to my employer about my salary instead of what is realistically stealing from his business.

any advice on what sort of salary i should be earning bearing in mind the profit i return.

I think you have failed to understand what employing someone means.

 

[Lime One]

setting up a business whilst working for my employer which will be classed as a conflict of interest

That's because IT IS a conflict of interests. Check out your contract, most will prevent you from doing this explicitly and such clauses are enforceable. The courts can make, in the event of you going ahead and your employer suing, an order for damages to reflect your employer's loss. This may well put you in an insolvent situation as such cases tend to be very costly to defend and the majority end in tears for the ex employee. Watch how fast this client will go from your new set up when your employer's lawyers apply for an order to the court for them to appear as a witness.

Even without an explicit contractual term your employer would still have a case for theft of a client. To do this whilst you are working for your employer would almost certainly come to light and would mean instant dismissal.

Banking arrangements for discharged bankrupts in today's climate are not easy, but can be obtained.

Your other biggest hurdle here is that your employer is charging this client an amount for the items and you HAVE to undercut to get the business awarded to you. This makes it very easy for the next business who can undercut you and afford to do it to 'buy' this client to get the same sort of deal down the road.

If price is your only USP then the new business will seriously struggle and you need more than one client to achieve a stable business. Think really carefully about this as a course of action. Starting up in business is hard enough but to do so with all this as a background would make it 10 times harder work. You would be constantly looking over your shoulder and in business you just don't get the time to do that.

 

[chahoo]

thanks for that my usp is a product i have designed specifically for my clients job which could snowball into something worth a lot of money to my employer but this product was designed whilst employed so i take on board your advice.

thanks

 

[Cornish Steve]

You really need to read the terms of your existing contract. Most state that any invention you come up with while working for the company becomes the property of the company.

 

[chahoo]

hi steve i dont have a contract or any terms of employment at all

 

[JEREMY HAWKE]

Im probably a little more old fashioned than the others here

If you worked for me and did this I would kick you in the nuts !

 

[Lime One]

The IP to the product will be owned by your employer so you cannot offer it to someone else without a further risk of being taken to court for IP infringement. This has been long since tried and tested in the courts so again very high risk to you. You do not have a business model if all you are selling is a product where the idea is owned by your employer.

 

[rs2801]

to even think of these actions is unethical. companies are there making money due to the hard work and dedication that is put into companies by owners in earlier days. the company you work for have probably invested millions and you are employed by them to do your job. contracts to say you can't do business in conflict of interest wont stand unless the current employer is happy to pay you in that time period while you can't work in a similar industry.

above poster is correct as well.

really its lining your own pocket and trying being dishonest to an employer which has employed you in good faith. jealousy is a wonderful thing. you even pointed out in your own post that you aren't willing to take the risks involved with business but more than happy to receive the money!!

 

[sellickbhoy]

it doesn't sound to me like you have a sustainable business plan though - 1 customer and theyll soon be off to someone else. you looking for any new customers 1st? maybe bring on a new customer and run it on your own instead of stealing your employers customer

plenty of "white collar" workers steal from employers - look at the recruitment industry - a consultant gets a few clients and starts up on his own - how is this any different?

sales managers take client lists

Ok, they have to win the business over, but they knwo what the client is looking for, so why not.

I think yo uare in for a world of pain if oy only have one customer and you wil def be sacked if yo utry to stay in your job

be a man, make the split from your employer and go looking for new customers too.

expect your current employers to play hard ball though. Sounds like they could cut margins just to squeeze you out.

 

[thebigIAM]

I don't get why you want to still remain employed. What is the attraction of that for you?

 

[Deleted member 27344]

Assuming you do make the 50k you reckon, how much of that will be yours after tax/ fees and other expenses?

It looks like someone is getting too greedy and hasn't learned anything from their past mistakes (bankrupt? why?)

 

[obscure]

I agree with the above posters that this is a really bad idea.

Not only are you exposing yourself to serious legal action for both breach of contractual responsibility and possible IP infringement but you are doing it while relying on a (possible) client who is at best morally questionable. They are happy to induce you to breach your contract and in so doing are treating your employer in a fairly underhand way - all so that they can get a better price. Who is to say they won't do the same to you or worse still go to your employer and tell them you have offered a better price and get them to match it (while you end up kicked to the curb by both of them).

thats my point i make min £1m turnover with minimum £300k profit per year, all self generated and get paid £30k so i hope you can you see where im coming from.

Your employer took a financial risk by investing (paying you, paying overheads and other costs) in the development of this product. They also have on-going costs and need to invest more money to develop future projects to keep the company alive - for those reasons I doubt that the £300k "profit" you speak of is really all profit.

In the meantime you took no risk and got paid a salary but now you feel entitled to benefit from your employers investment? I would have to say that I don't see "where your coming from".

As I see it you have two (legally acceptable) options:
1. If you want the benefits you need to take the risks and make the investment - leave your job, invest in making a new product and building up clients.
2. If you want the safe salary route then talk to your boss about a pay rise (but don't be surprised if they decline because this "profit" you mention isn't actually profit at all).

 

[Tom McClelland]

thats my point i make min £1m turnover with minimum £300k profit per year, all self generated and get paid £30k so i hope you can you see where im coming from.

It is very common in companies for employees to fail to appreciate that they aren't the only contributor to a particular piece of margin, and to overestimate the profit that they bring to the company.

Take an example from a company where I used to work. There was a salesman who might sell £600 of on-site training with an employee cost of £200 so he would reason that he'd been worth £400 to the company that day.

The trainer would go on site, would know what he as being paid and what was being charged, and he would reason that we was worth £400 to the company that day.

The customer turns out to be a bad credit risk but by superhuman efforts the credit controller gets all £600 out of them, and reasons that he was worth £600 to the company that day.

The problem that you get is that everyone is making a huge profit for the company, but the company actually ends up making a loss! How did that happen?

And that is before you factor in everyone's holidays, employers NI, pensions, the fact that they need management and direction, establishment costs, etc. The, "I made £x,000 for the company and I was only paid a paltry £y,000 by the tight &%^!&!^"" argument rarely stacks up when the true costs of running a business and the requirement for everyone to make a contribution to successful sales is considered.

 

[GRDCredit]

I am pleased to see that you have the credit controller making the biggest contribution to profit thus proving he is the most important person in any company!

 

[wizzard]

hi steve i dont have a contract or any terms of employment at all

However it can still be argued that you've accepted the terms the 1st day you turned up on the premises and started working for your employer.

 

[OPC]

Hopefully you have the jist that this is a really bad idea.

Speak to your employer and tell him how you feel. What is the worst that could happen. He will either give you a wage rise or kick you in the buts (LOL at Jeremy Hawk!).

If it goes badly, then you go out on your own. Whatever went wrong for you before, just make sure you learn from your mistakes!

Regards

Colin

 

[JamesCartwright]

I don't think you should do it (I wouldn't!) - it sounds too risky and unethical. Can you make some extra money doing something else that you won't get fired for?

James.

 

[duzzar]

I don't think you can do this by yourself for all the reasons previously discussed. The only way you may get around is have someone you trust to set up the company and represent you. Of course you will have to pay him/her but least you can still make some extra cash. If the person is your wife or your parents, you then may be able to have all the profit.

 

[KidsBeeHappy]

I think you've missed one important consideration, the sole customer at present if very very likely to go straight back to your employer and tell that you can do the product cheaper and ask him to match the price.

This will mean that you'll lose both your job, and your one and only customer, and any ability to start up yourself as your employer is likely to tell any suppliers that you are not person to respect commercial agreements.

 

[PayVector]

Why don't you speak to your employer about a bonus system or a commission system. If you are brining in profit that the company would not see without your presence then you have value above your salary.

Another option is for you to re-write the product (am assuming it is some form of software) but better in your own time. This is then your product and something to base a business model on.

What you can then do is once you are ready to go to market leave the employer you are with now, start your business and go after clients like any other business.

Doing it the way you propose in my eyes is unethical. However I do not believe there is a law that states you can not take lessons from the business your employed with and use them to start your business later down the line.

Hope that helps.

 

[sksservices]

Do what other people do when they get these kind of conflicts. Quit your job and if your contract states you cannot compete for several months - stick to it.

Then when your in the clear go make hay.

 

[oberta]

here's my feedback mate: You are a rat.

sleep well.