Non-Competes in a Down Economy

I keep inching and inching into the beat of my colleague, Ray Capece of Venture Files, but I think it’s pretty important and weighty times for web professionals and small business owners alike. Unlike anytime in our history, the uncertainty of the future of our world and country are great.

Everyone is speculating about what the economic downturn bodes. Some Evangelicals I’ve talked to think that the investment of the Federal government into banks represents something akin to the fulfillment of end-time prophecy regarding the mark of the beast.

Others more focused on geo-political analysis believe we are seeing the end of the American Empire.

All of this is speculation and may or may not have merit. We simply don’t know. However, what we do know is that people are losing jobs, including in the web industry. We do know it’s hard for people to sell their homes without walking away still owing a mortgage. We do know that the impending baby boomer retirement wave just got pushed back.

A lot of companies, particularly smaller ones, like to use non-compete clauses to ensure that good help doesn’t go to a competitor when that help leaves. But what does that employee do when they are laid off and still have a non-compete?

While I will give my disclaimer that I am not a lawyer, I will say that anecdotal evidence suggests that non-competes are mostly unenforceable. Most laws are drafted in such a way that non-compete only have grounds when trade secrets are in play but countermanding court rulings suggest that no company can restrict someone from making a living.

Talk to your lawyer if you are unclear. At the end of the day, I suggest staying in a stable job if you can at least for a year or so until we put some distance between now and then. If you absolutely must leave, you probably don’t have to worry about non-competes with the economy the way it is. Take the job you can. Just don’t go sharing the information specific to the company you left with the company you are joining. That would be competitive and would probably be enforceable.

Also, if you can, honor your non-competes because it will speak better to your character. Sometimes it’s not possible. I get that. But all things being equal, if you can honor your non-compete, do so. When I left b5media, I was under a non-compete. In fact, I still am for another month or so. After my announcement, I had a number of blog networks approach me asking me to come work with them and I turned every one of them down because I made an agreement that I very well could stand by. So I did.

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Don’t Quit that Job Just Yet


Photo by Egan Show

The economy has everyone shaky, even those in the web space who have been largely unaffected, so far, by the ups and downs in the market. The Web market is largely filled by companies who have, at best, private equity via venture capital or angel funding, or they simply are bootstrapping and don’t have any outside investment.

Times are tight, but even in the VC-stage where a company might have anywhere between a million dollars in investment capital to $35M or more, the money really isn’t that big in the grand scheme of thing and the funding is privately held. Mostly.

Here in Baltimore, VC money flows toward Biotech companies where significantly higher investments are made in comparison to small investments in the web space. Obviously, biotech has a higher overhead when it comes to research facilities, labs, expensive chemicals and doctoral employees. Web startups deal with much smaller costs like commodity priced hardware, and much cheaper salaries. Again, by comparison. Biotech is drying up, but web investments continue to happen.

However, just in the last three days, at least three people I know in the web space have lost their jobs due to the slowing economy. We’ll probably see more of it as well. eBay, who is admittedly a public company and outside the realm of the “typical” web company, just announced a 10% reduction in their workforce. That’s not going to be the end.

The worst time to try to change jobs is right now. If you are able to get a great job, you’re going to be subject to a last in, first out layoff policy. It’s likely anyway. Nothing is ever guaranteed.

If you’re independent, you may very well encounter a slowdown in business (so I hope you’ve saved!), but you probably aren’t going to fire yourself. Now would not be the time to start that practice.

Conflicting recommendations exist. Some recommend that work is going to be hard to come by in an entrepreneurs world, so flee for stability and medical benefits. The other side says, as I do, that work is going to be hard to find and if you get it, you’re going to be far from stable.

Be very careful how you proceed. Make sure you have a backup plan. Try not to panic. Hunker down for the long-haul and do what you can. Don’t let the economy frighten you but instead, lean on your strengths and make money how you can. It’s going to be tough for everyone, myself included, but there will always be a demand for quality people in essential positions.

If you’re in a stable “day job”, I would not recommend quitting now to go the entrepreneurial route. It’s going to be tough going. However, if you’re already there, stay there and kick some butt. It will be slow. Times will get tough. But you can survive!

You Must Be Somewhere

It’s 2008 and with 2008 comes technology. It’s awkward, I realize, for some small businesses to justify the use of social networks, blogs etc. After all, how can a small business trying to remain profitable encourage employees to waste time on Facebook?

Please Help

We think of companies like Dell and JetBlue as examples of companies that “get it”. Even this weekend at WordCamp where I hammered the ideas of Marketing, Message and Brand, these companies came up as examples of companies engaging in the social space, including blogs.

But these broad examples are still the exception to the rules. Most companies still don’t realize that they need to be in the space, engaging with not only customers but possible customers.

I met one gentleman this weekend who owns a construction business but is an English major. He decided he would start writing DIY and home improvement stories in the form of a blog and is making big waves.

I’d say most home improvement companies don’t blog. They probably aren’t on Facebook. Probably not tweeting on Twitter.

There’s a company here in the Baltimore area that has a radio spot. In the radio spot, the owner says he personally goes to every job site every day until a job is done. When that’s the way most companies operate, it’s easy to think there is no time for social media.

Here’s the secret sauce, though, that many are missing. Your customers are behind the walls of social networks and on blogs talking about you somewhere. Trust me. You can’t afford not to be part of the conversation, and there’s no legitimate excuse not to participate.

With the economy the way it is, it is truly a cheap way to market, do public affairs and drum up business. Why wouldn’t you do it?