Tips on Avoiding a Conflict of Interest When Starting a Business

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Tips on Avoiding a Conflict of Interest When Starting a Business


Tips on Avoiding a Conflict of Interest When Starting a Business

Prisoner Holding JailbarCreating a conflict of interest when starting a business can be a major setback. Several years ago, I worked for a financial advising company. One thing to know about the financial industry, is they have strict policies when it comes to conflicts of interest. The financial industry is so worried about potential conflicts of interest, I even had to have the business activities I was participating in approved before being hired.

The financial world isn’t the only industry that has strict policies. Individuals can find themselves putting their employment in jeopardy, lose their licenses or even face hefty fines or jail time for participating in activities which constitute conflicts of interest. Some companies are not as strict or may even lack conflict of interest policies. Still, it’s important to be aware of potential conflicts of interests and take appropriate steps to avoid them.


PolicyFirst and foremost, be aware of the Conflict of Interest Policies your employee may have in place. These policies generally address the activities you are allowed and not allowed to participate in. If you are an employer and don’t have a Conflict of Interest Policy, it’s not too late to create one. As with your employee manual, the individuals you employee should be aware of your policies, as well as understand them. You might even consider implementing procedures that require your employee sign your Conflict of Interest Policy.


Resolution Conflict Buttons Show Fighting Or Arbitration
If you plan to start a side business, consider approaching your employer with the idea. Even if your side business has nothing to do with your “day job,” your employer may have concerns. For example, will your new business interfere with your current work duties? After all, your employer hired you for a specific job. If you’re unable to perform your job duties, you may lessen your value to your employer.

Perhaps your job does represent a conflict of interest to your current job duties. Again, your employer will likely want to address those conflicts. Identify what parts of your new business may create a conflict of interest with your employer. Perhaps you and your employer can come up with ideas and specific guidelines to avoid conflicts of interest, while allowing you to continue pursuing your business project.

Poaching Business and Other No-Nos

High Or Low Road Directions On A SignpostStarting a business is hard work and finding customers may be even more difficult. It may be tempting to skim a few customers off your current employer. Don’t do it. I hate to even bring this topic up, as I feel entrepreneurs should know on an ethical level that it’s inappropriate to poach business from your current employer. If anything represents a conflict of interest, this does.

Other conflicts of interest may include soliciting business from clients. When a client comes to your employed place of business looking for services, it is not your place to offer them your side services. Your employed place of business is not your customer base. Rather, it’s your employees customer base. When you’re working for your employer, do the job you’re paid to do. Don’t look for opportunities to scalp customers.

Final Thoughts

Though there are many gray areas when it comes to having a conflict of interest. The least you can do is ask yourself… Will the activities I plan to do with my new business hurt my employer or jeopardize my employer’s business?

By | 2018-06-02T17:12:42+00:00 March 22nd, 2016|Business Planning, Human Resources, Startup Advice|4 Comments

About the Author:

Renee Townsend is a Certified Professional Coach and Business Consultant, who helps women start, grow, and run successful companies. She has a special knack for finding money for startup businesses and helping entrepreneurs get funded.


  1. Nelson April 3, 2016 at 12:04 am - Reply

    Great post on conflict of interest when starting a business.

    Poaching is indeed a bad thing especially when you complete brand new start up.

    But on a honest note… these practices are happening all the time even with major fortune 500 companies. Its just a matter of being as ethical as possible.

    great work.


    • Renee April 3, 2016 at 12:15 am - Reply

      I agree, Nelson. Poaching happens all the time. I’ve known of several individuals who’ve “stolen” customers from their previous companies. I’ve also know business owners who’ve been the victim.

      Sometimes, it’s inevitable that customers will follow the person they’ve been working with. One day they call, looking for said person, and learn the person has left the company.

      Like you said, it’s a matter of being ethical. What face are you planning on putting on for the customers.

  2. Liz April 6, 2016 at 12:26 pm - Reply

    Good post and definitely worth considering when you are starting a business while still being an employee in another business. It would be very tempting for the budding entrepreneur to try and poach customers that are coming into their workplace when first starting out as they want to get a head start. But that would be a very slippery slope, plus they would not get the satisfaction or knowledge on how to generate their own leads off their own back.

    • Renee April 6, 2016 at 11:41 pm - Reply

      You make a great point, Liz. Being able to generate your own customer base is an important part of continuing to sustain and grow a business. Regardless of how great you are at doing the job you’re hired to do, there will be some attrition. Without new customers and clients, a business will slowly (or quickly) fade into non-existence.

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