What Smart Entrepreneurs Do When Employees Become Competitors
Contributed by SBOC Member:
Pat Miller
Founder of the Small Business Owners Community
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It happens in every industry, at every level. Employees become competitors — and when they do, most business owners have no idea what to do next.
Your best employee just walked into your office.
“I’m leaving. I’m starting my own business.”
And it’s in your industry. Possibly down the street. Definitely competing with you.
What do you do?
After managing people for over 20 years, here’s the truth most business owners don’t want to hear:
Let them go.
Why You Can't "Save" Them
Your instinct is going to be panic. Then you’ll think about throwing money at the problem.
“What if I give them a raise?”
“What if I promote them?”
“What if I offer equity?”
Here’s why that backfires:
They didn’t wake up one morning and decide to leave. They’ve been rationalizing this decision for weeks, maybe months. They’ve thought about the money, the hours, the opportunity, the lifestyle.
They’ve already decided the grass is greener.
When you throw money at them, they think: “Why didn’t you do that already?”
It confirms they were being undervalued. It confirms they need to leave.
The Critical Steps to Take Immediately
Once someone announces they’re leaving to compete with you, the clock is ticking. Here’s what needs to happen:
- Cut their PC access – Not tomorrow. Today. Right now. They shouldn’t have access to your systems, client lists, or proprietary information for another minute.
- Call your attorney – Before you do anything else, get legal counsel on the phone. Employment law is complex, and you can get yourself in trouble fast if you handle this wrong.
- Document everything in writing – Get it on record that your trade secrets, workflows, and client lists are protected intellectual property. Make it clear, professionally, that you hope this won’t be an issue down the road.
- Pay them out if necessary – You may need to pay them for two weeks to avoid labor law issues. That’s fine. But they’re done working in your business effective immediately.
How Smart Business Owners Prepare Before Employees Become Competitors
Here’s the uncomfortable truth: everyone leaves eventually.
If they don’t own part of the business, at some point they’re going to move on. Your job as a business owner is to be ready.
Always train AND cross-train. If only one person knows how to do something critical, you have a problem waiting to happen. Every key function should have at least two people who understand it.
Always be recruiting. Keep your network warm. Keep an eye on talent. Have people in mind who could step in if someone leaves.
Document your processes. Your workflows, your methods, your “secret sauce” – it should be documented, protected, and not walking out the door in someone’s head.
The Hard Truth About Employees
Managing people is a responsibility. It’s also one of the hardest parts of running a business.
Employees serve a vital role. They let you grow beyond what you could do alone. But they’re also an obligation – to treat them fairly, to develop them, and to be prepared when they inevitably move on.
The employee who left to start their own thing? They’re replaceable. Everyone is.
It doesn’t feel like it in the moment. But it’s true.
Plan accordingly.
Listen to the full discussion on Businessing with Pat Miller.
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Contributed by
Pat Miller
Founder of the Small Business Owners Community
Pat spent two decades in broadcasting management and hosting. After leaving the radio industry, he spent time consulting small businesses and realized the support system for entrepreneurs was broken. Where could you find help for improving small businesses and building real connections with other like-minded people. In June of 2020, the Idea Collective Small Business Community was born.