Tips on Avoiding a Conflict of Interest When Starting a Business
Creating 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.
First 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.
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
Starting 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.
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?