Industry Trends

When A Former Employee Becomes A Competitor

Sep 01, 2022 • 7 min read
small business competition employee
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      No matter how big or small your business, when an employee becomes a competitor, it’s a big deal.

      So what do you do when someone who knows your corporate secrets decides to enter the market as a direct competitor? While turning to the courts can be an effective and sometimes necessary recourse to protect trade secrets, copyright, and intellectual property, it can also be costly and comes with no guarantee of success. Also, business owners run the risk of the publicity boosting public awareness of a competitor, particularly when the defendant is seen as the underdog. 

      So if not the courts, then what? Here are a few ideas to consider taking on a market competitor that knows your secrets: 

      Double-down On Marketing

      Deal with new, familiar competition by focusing on your own business. Consider increasing your marketing efforts to keep your brand in the spotlight—not your competition’s.

      When your competitor knows your business inside and out, try something they don’t know: new marketing campaigns, channels, or strategies. Maybe now is the time to invest in TikTok or launch a new branded YouTube channel. It may also be worthwhile to set aside a larger-than-usual budget for marketing and advertising to help you further separate your brand from competitors (i.e., your former employee’s company).

      Reports suggest that current customers spend upwards of 67% more than new customers—which already gives you a leg up on your new competition since they don’t have existing customers yet. Consider tapping into your client base and dusting off your email list to avoid losing this low-hanging fruit.

      What Makes You Different From The Market Competitor? 

      You’re more than just the products you sell or the service you offer. That means it’s time to tout the big picture. 

      Differentiating your business is an advisable strategy regardless of who you’re competing against, but it can be even more critical when you’re competing with a former employee who understands the nuances of your business. There are several ways to prioritize what makes your business different from theirs and any other competitor in your market.

      Maybe you’ve been in business for 15 years, but your former employee started their company 6 months ago. You’ve got time, experience, and wisdom on your side. In your marketing communication, highlight this. Maybe you’re in a better location, offer delivery services, or have a team that can customize your product for each customer. Make the differentiator your calling card.

      What’s unique about your service offerings and products? A retailer that sells home goods might emphasize their diverse collection of goods from around the world or feature local products to show their community connections. If you have a niche, lean into it.

      Make sure your company values and mission align with the way you help customers or clients. Take a family-oriented lawn care company—they might emphasize their legacy and how their family has run the business for multiple generations.

      You might even update or add new values, like a dedication to harnessing the latest technology to save the planet and improve your customer service simultaneously. That same lawn care company may invest in more energy-efficient tools that are better for the environment and do the job in less time. That same retailer may invest in a better point-of-sale (POS) system that allows customers to get paperless receipts at checkout.

      Boost Your Customer Loyalty And Community Programs

      Your customers and community are major factors dictating your success, so you should take this opportunity to show them some love. Set up some community events to get people shopping in your store or visiting your business to meet the team. Invest in some branded company swag to give away at these events or just because it’s a simple advertising tool.

      If you already have a customer loyalty program, add extra perks and special discounts for patrons who’ve been with you longer and speed up how long it takes to earn rewards. If you don’t have one, start a punch-card or points-earning program, a referral program, or just send special gifts and thank-you notes to clients, especially if it’s almost time to renew your contracts with them.

      Cultivate Team Member Loyalty, Too

      Your employees are arguably the main driver of success for your business. Rewarding people for their hard work shows that you value them, and they’ll be more likely to stay and help grow your company in return. This is especially important in the age of the Great Recession, where 1 in 4 people were planning to leave their current job.

      So, thank your current employees for their hard work and dedication. Find new ways to show that you value them, such as: 

      • Offering more competitive salaries
      • Improving the benefits packages
      • Rewarding them with bonuses
      • Giving thoughtful gifts for work anniversaries, special personal events, professional milestones, and for the holidays
      • Hosting company outings where employees can bring their families
      • Providing extra time off during the holidays or for family-related emergencies
      • Offering flexible work options

      These are just some of the ways you can promote a strong, welcoming company culture that will make people want to stay with your company instead of leaving to start their own.

      Embrace A Direct Competition As A Challenge

      Competition is what pushes us to be better, and that’s never truer than in business. If your new competitor just opened, ride it out for a while to see how it affects your business. Watch what choices they make to get customers, what marketing tactics they use, and what special offers they give to customers or clients. 

      Figure out what differentiates your business from theirs. Then, do more of what’s working, try new tactics, and improve your business offerings to stay competitive.

      A Word About Non-Compete Agreements 

      A non-compete agreement is a legal contract or clause that prevents an employee from becoming a competitor after leaving your company. 

      Some states don’t allow for the enforcement of non-competes or limit the enforceability in certain situations, and federal legislation also impacts enforceability in certain cases, too. In other words, don’t put all of your eggs in the non-compete-clause basket. 

      Additionally, if you choose to use non-competes, ensure you review yours frequently to fully understand: 

      • Type of work employees are and aren’t allowed to engage in after leaving the company
      • What defines “competition”
      • Where employees are and aren’t able to engage in work
      • Length and scope of the non-compete agreement 

      BTW, if you’re interested in adding non-competes to your employee must-sign paperwork, talk to an attorney first to ensure you’re drafting something legal and enforceable. Also realize that a non-compete shouldn’t result in an inability for a former employee to earn a living in whatever field they choose. Ultimately, you’re just trying to stop the sharing of your trade secrets, including processes and intellectual property.

      The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything. The information provided in this post is not intended to constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.
      About the author
      Derek Miller

      Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.

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