How to Keep an Employee from Quitting and Becoming a Competitor
by Nick Gromicko, CMI® with Kate Tarasenko
We multi-inspector firm owners have all heard the story before. You hire a home inspector, you spend a lot of time, energy, and money training him/her. And then, just about the time they start making you money, they quit and open up their own home inspection business. You ended up training your competitor. What can you do?
There are three common ways of preventing this from happening:
- You can have them sign a non-compete agreement. The problem with them is that you generally have to go to court to enforce one, and courts often don't uphold non-compete agreements.
- You can have them agree that if they quit, they have to repay you some amount for the training they received. And, again, this would require you to go to court if they simply quit and refused to pay.
On a personal note, I've never used either aforementioned method (legal or financial) as a mechanism to force another human being to work for me when he/she wanted to leave. It's just not my style.
- You can pay them enough money to keep them from quitting. There is a problem with this method that is particular to the home inspection business. Home inspectors who work for you often know how much the consumer is paying. Many home inspectors even collect the fee on behalf of the company, on-site, at the inspection. This means that the employee is privy to the revenue side of the business. This causes employees to believe that you are making a lot of money off of the "sweat of their labor." It is difficult, and maybe even financially impossible, for an inspection company to pay an employee as much as the employee believes they are bringing in for the company.
A Jolt of Reality for Your Employee
Most employees anywhere would agree that they're underpaid. So, try this: Give them a desk project. Give him/her access to all the company's expenditures, including the checkbook stubs, paid invoices, credit card receipts, etc. Don't give them the revenue side of your books, just the expenses. Ask them to sit down and categorize all the company's expenses, adding up how much the company pays for things like marketing, insurance, training, vehicles, payroll, etc. Have them produce a report with the totals for each category. This project may take the employee one or two days.
You'll get three benefits from this exercise:
First, the employee who had no intention of quitting will gain a greater appreciation of what your company has to spend to employ them.
You'll get three benefits from this exercise:
First, the employee who had no intention of quitting will gain a greater appreciation of what your company has to spend to employ them.
Second, the employee who was considering quitting and opening up their own competing inspection company will come to realize that there are a lot of costs he/she likely hadn't considered. This exercise will dispel any myths he/she possessed about the net revenues being anywhere close to the gross revenues of the business.
And, lastly, you as the business owner might actually learn something from the expense report that will help you to better manage the costs of running your inspection company.
In any case, do your best to compensate your employees at the market rate, and add extra where you can, whether it's in the form of additional compensation that's higher than average, health benefits, paid time off, etc. Make it difficult for them to leave by treating them as well as you can afford to.
A Jolt for You, Too
An employee leaving to become your potential competitor might be just the jolt you need to re-evaluate your business. Keep an eye on their business, including their marketing – just as you would with any competitor you didn't personally know – and see if there's anything they do that you can do better. Explore options that will set you apart, such as by offering specialized ancillary inspections, beefing up your marketing, aggressively targeting the real estate agents in your area, tapping a new revenue stream by offering commercial property inspections, and/or becoming a Certified Master Inspector®.
If you can't change the circumstances, you'll need to respond in a way that's strategic and beneficial for your livelihood. You might be losing an employee, but you can still gain the competitive edge.
More on this subject in SCALE UP: 100+ Steps to Growing and Systemizing Your Multi-Inspector Firm
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