Turning the Tables

Building Relationships

Showing her former employer that it could save money-and get an immediate ROI-Jennifer Carnie, 33, land her first client. Carnie, co-founder of Customer Systems Inc., a 3-year-old Scottsdale, Arizona, computer consulting firm, had worked in sales for a software company for five years. She left on good terms and went to work for another organization that eventually folded. Unemployed, she and her partner, Mike Hoffler-also a former employee of both companies-decided to start their own business. They approached the original software company they had both worked for, which had begun laying employees. After a month of discussions, Customer Systems became a vendor. Today, Carnie and Hoffler, 48, still handle about three to four projects per year for the software business.

"The timing was right for all of us-they needed to farm out projects, and we really needed the work," says Carnie, whose business projects more than $2 million in sales for 2004 and has 15 employees.

If your employer isn't in layoff mode, you may need to make your case a bit stronger as to why now's the time to outsource a certain function to you. Approach your immediate boss about 30 to 60 days in advance of when you intend to leave.

"This is all about relationships. If someone's a great employee and is leaving with a skill that we can use and need at the time, we will be open to becoming that individual's client," says John Reynolds, vice president of HR for Carlson Hotels Worldwide, a travel and hotel conglomerate based in Minneapolis.

Almost 1 percent of Carlson's corporate employees have created such arrangements over the years after they left the company, Reynolds says. He recalls one marketing coordinator about four years ago who persuaded the company that she could handle the task of processing hotel guest room comment cards more cheaply than it was being done inside the company. She had three children and wanted to start her own homebased venture, "She was a dedicated employee who knew our values and our corporate culture, and also showed us how this would make financial sense for us," Reynolds says. "We still work with her today."

Entrepreneur Richard Nicholas, 42, is also a big believer in having such strong relationships. The CEO of E Solutions Corp., a Tampa, Florida, computer services firm with annual sales of $5 million and 24 employees, still has a former employer as a client after seven years in business. Nicholas, a computer systems engineer, and a former business partner had been on a one-year, long term assignment for PricewaterhouseCoopers. Nicholas says that while they enjoyed the work, they'd outgrown their roles, and it was time for them to move on to a venture on their own. So they decided to approach PricewaterhouseCoopers about becoming a client of their new company. "They knew that we could do the job well, and we were a proven commodity," Nicholas says.

Today, this client makes up 5 percent of his customer base of 6,000. (Nicholas' original partner has since left the business, though another partner they acquired at the beginning is still involved.) And, over the years, E Solutions has even become a client to about four employees who left the firm to start their own individual ventures.

The higher up you are in a company, the better your chances may be of clinching a deal. As vice president of property management for a real estate developer in Kansas City, Missouri, Nancy Smith, 44, had gone as far as she would go. While in her position, she'd created an in-house department to screen new employees. She had previously contracted out this function but was never really satisfied with the results. Feeling that she knew this business, she initially met with the president of the company-who also happened to be her boss-to discuss her dream of starting her own employee-screening company. She asked him to eliminate her position, contract the work out to her, and let her become a consultant working with the employees who had formerly reported to her.

"I appealed to him on a personal level," says Smith, president of ACS Data Search LLC in Overland Park, Kansas, which now has 19 employees and projected 2004 sales of $1.3 million. "But I went beyond that and explained how I could save the company at least 10 percent [through outsourcing] its employee-screening work to me."

Client Caveats
Thinking about taking on a former employer as a client? Watch out for these potential pitfalls:
  1. Make sure any agreement you sign spells out whether you're permitted to take on competitors as clients. Large multinational companies typically don't have a problem with this and often anticipate that your client base will include some competitors. But you don't want to wind up with a problem down the road.
  2. Don't rely solely on this one client. Ideally, your former employer should account for no more than 20 percent of your total business, especially once you're on your own for at least six months. Always be marketing to get new clients.
  3. There's a chance your former employer could take advantage of you, since he or she knows your weak points and may try to get extra work for the same price. Don't let this happen.

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This article was originally published in the December 2004 print edition of Entrepreneur with the headline: Turning the Tables.

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