Job versus Business
Over the weekend we got to visit friends whose small business provides a comfortable living for their family. Building it up to this point has taken several years. The nature of the business makes it heavily dependent on the expertise and personal effort of one of them, and that is not easily changed. Let’s say that person is P, the pivot point of the business, and the other main person is S, the support without whom P couldn’t carry on. They have some other staff, but teamwork of this pair is what makes the business thrive.
Their largest client, C, wants P to work for them full time. The question is to take it, or not to take it?
P has calculated what would be the minimum offer that could make it financially worthwhile to say yes. Of course the offer would have to be above that.
It may very well be above that. Then the question becomes whether accepting it is too big a risk.
What? How can a regular job be a bigger risk than running a small business? Stick with me and I’ll explain.
What’s happening here is not terribly far off from the last two occasions when a company wanted me to work for them full time. It can start out well, but inevitably it sours.
P and S provide a unique service. C loves their work. C wants exclusivity specifically because they want the best entirely to themselves. The only way they can see to gain exclusivity is to put P on their payroll. C can pay enough to make it financially worthwhile for P to shut the business. S wouldn’t have to provide support any more because C would do that. P and S wouldn’t have the hassle and uncertainty of running a business. Surely it would be better for everyone.
Except if it goes the way it has whenever I’ve made the mistake of saying yes to a similar offer, it will probably end badly. Maybe not immediately, but within a year or so.
Mindset Mismatch
Companies and the people within them see employees very differently from suppliers. This is so deeply conditioned, they can’t help it.
Employees are supposed to stay in their lane, doing what bosses direct them to do. When I’m in a flippant mood, I describe it by saying bosses see employees as owned (completely theirs to control) but see help contracted in as rented (able to walk away if the situation deteriorates somehow). That’s an extreme way to put it. In more serious moods I describe it more politely. Thinking and acting on behalf of the overall business is for executives and maybe senior managers, not anyone else.
The service P and S provide is entirely about benefiting their clients’ entire businesses. They boost reputation, visibility, sales and market penetration. They are so good at it because they are so focused on the welfare of their clients.
What will happen if P takes the job?
P will continue to focus that way. It’s essential to doing the service well. Any step toward just doing what bosses want would degrade the service.
Either the executives and management will begin to resent P’s inability to behave like a proper subordinate, or P will conform and no longer be able to deliver the same level of quality being delivered now. It’s rare for those pressures not to prevail in one form or the other. Either way, C’s executives and top managers become unhappy. Either they become annoyed that P doesn’t conform to just doing as directed, or they become annoyed that the service isn’t as great as it used to be.
Knowing P, I have a pretty clear picture of what will happen. P can’t stand to deliver less than the best. P will approach C’s needs more like a stakeholder than a subordinate.
This has happened to more people than just me. I have seen it happen repeatedly to colleagues who went from working independently as a contractor or consultant to being an employee on someone else’s payroll.
What’s At Stake
Many people believe a so-called regular job is much more secure than having a small business. Maybe that was true when I was a child. My father and grandfather were with the same employer for decades, getting promoted as they gained experience. In their generations that was normal. Now, in many fields the employers prefer to toss people out before they are there long enough to get much increase in salary or protections that may come with seniority. As my brother is fond of saying, a so-called permanent job is only permanent until the company wants to lay you off.
If P and S shut down their business, the job would mean not having responsibility for the burdens of running a business, but that’s the only big gain. The job would not make their finances more secure. It would put their financial security in C’s hands. That could be a good trade-off if it would last until, say, when P or S can start drawing a pension, but that’s many years away.
Arrangements like what C proposes tend to fall apart long before then. I usually see them collapse within two years. Even if P and S don’t shut down their business, that’s long enough for it to lose momentum. If P is not able to hold on as a full time employee of C, after the job falls apart P and S will face years of rebuilding their business.
Rebuilding is terribly hard to do, almost as hard as the original startup, and finances may be precarious while the rebuild is in progress.
Some Options
This doesn’t mean P has to say no to the offer. It does mean P can’t look at the offer as a binary either-or decision. The risks for P and S in having P accept a standard full time employment contract are too high to be sensible. P would need to negotiate some tweaks.
What are some of the possibilities?
C may be taken aback if P won’t sign with their standard contract. It is common for British employment contracts to forbid an employee from engaging in any other job or business on the side. I have been asked to sign a standard employment contract that even forbade any volunteer activities on my own time. (Needless to say, I said no.) That’s how much companies in the UK expect to control their workers’ lives.
But it is possible for P to accept employment with special provisions. For example, P could accept part time employment by C, alongside P and S continuing their business at a reduced level. (In both the UK and USA, there can be tax complications. That’s for the parties to sort out together.)
Alternatively, if C insists on full time, P could insist on a golden parachute clause that kicks in for termination before at least X years have passed. This would provide a big enough exit payout to carry P and S through the financial crunch of restarting their business from dormancy.
In my view, the simplest solution would be for P to politely decline the job and counteroffer special status to C as a client. C could have a guaranteed amount of access, priority over other clients whenever P has a resource or scheduling squeeze, exclusive access to an especially elite slice of the services, the ability to get up to a certain amount of extra attention at a pre-set rate by just sending a written notice… whatever makes sense in the business relationship.
I’ve had such arrangements with especially good clients. This worked well. When the client had a lull in their need for me, they only paid the base rate and took the base amount of effort. They had no responsibility to find something to keep me busy or pay for time they didn’t need. When they had a special project, they could have as much help as they wanted without delay at a known rate. The longest of those contracts lasted more than a dozen years.
Wrap-up
This decision isn’t as simple as it may first appear. P and S have several pluses and minuses to balance against each other. But it also isn’t just a yes or no decision. There are options.
The key to getting it right will be looking beyond the usual framing of job versus supplier to lay out what C really wants, what P and S really want, and what twist on the normal framing would allow them all to be happy working together for more than just the next couple of years.
Employee vs. supplier is one issue, but the more challenging culture shift probably would be from entrepreneur to employee. Free range vs. fenced in.
The biggest problem I've had as an employee is, as you've said, being "owned" by the boss (or people who think they're the boss). Most supervisors resent an employee with their own ideas, who will stand up for themselves and for what's right and ethical, and who can't be "controlled" to be the subservient employee they want. I've always done far more than my job description, using my skills and talents to the benefit of the employer. But that sometimes engenders jealousy or resentment by employees or supervisors who aren't that productive, and whose egos depend on subservience. Instead of acknowledging the good done on behalf of the organization by a hard-working but outspoken employee, they find ways to sabotage that employee. I once reported fraud, waste and mismanagement of a federal employer and was treated like I was the problem. They will almost always circle the wagons around the higher-ups. I am fortunate that I had a few good supervisors, and many great opportunities for advancement in the federal system, which helped when it was time to retire. But the bad managers far outnumber the good ones.