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When the Heck Are You Going to Have Time to Start a Business?

THE ENTREPRENEURSHIP BUG hits a lot of people while they are at work. We have already touched on the issues of incompetent co-workers and unpleasant office surroundings, as well as actually having to perform something called work—all of which make people daydream for a way out. However, never forget that starting or buying a business also requires work. A lot of work.

There is a metric ton of work involved in exploring a business model and laying the foundation of a business. You have to research your target customers and the need for your products or services. You have to put together business plans and other materials. You have to do more research on vendors or office locations. You have to build prototypes, write initial code, or achieve early milestones. You have to raise capital. You have to put together a marketing plan. You have to create a corporate structure and much, much more. When you have a job and are working eight- to nine-hour days, and add in commuting, lunch and potty breaks, having dinner, saying a few words to your significant other (and possibly kids), watching American Idol and getting some sleep, there isn’t a whole lot of free time to spend on starting a business.

If you are working while trying to start a business in your free time, you will either take years to get all the work done (which, by the time you get it done, half the research will be out-of-date) or do a crappy job (i.e., take shortcuts and not do the work), both of which will set you up for failure.

On the other hand, quitting your job and forgoing your weekly paycheck to explore entrepreneurship takes nerve, risk tolerance, and financial security. Many aspiring entrepreneurs can’t fathom doing that either (another red flag is waving here, folks…if you are too risk-averse to go without a paycheck for several months, quitting your day job is not advisable).

The (Legal) Problem with Double-Dipping

Some people try to get clever and figure out a way to double-dip and do both endeavors at the same time. In plain language, that means that some people try to lay all of the groundwork for their new business while they are employed. I love this idea in theory; however, there may be a couple of issues with this master plan.

First are the moral issues. Your employer is paying you to spend your work day thinking and working for them. A lot of people feel entitled at their jobs. “I have worked here for years,” they say. “They owe it to me.” No, your company actually pays you cash, and perhaps gives you benefits, in exchange for your work. That is all they owe you. It is a fair trade, and you can leave if you aren’t satisfied with it. It isn’t appropriate to use their time, resources, and assets to work on anything other than what it is they are paying you to work on. And if you do it on your lunch break or after hours, you shouldn’t be using their resources; their resources should be used to create value for their shareholders, not you.

Some people don’t care about the ethics. If the moral argument doesn’t sway you, then you may be more persuaded by the legal argument. If you are working for another company, there are actual legal reasons why you can’t be working on your new business. First is that pesky paperwork that you may have been given when you first started your job. You may not have read the paperwork, but often it says something along the lines of anything that you create while working for the company, using their resources or otherwise, belongs to the company. That means anything. Even if you haven’t signed that type of paperwork, companies can make a strong legal claim that if you wrote a business plan using their computers and printed it out with their paper, ink, and printers, made phone calls to potential suppliers using their phones and phone service, or researched the idea using their resources, while they were paying you, they own it.

There is a great high-profile legal case that perfectly illustrates this issue. Carter Bryant was employed by the toymaker, Mattel, in the company’s collector Barbie doll division. He was a well-known designer who designed many of Mattel’s high-profile collectibles. During his lunch breaks, he started developing and sketching the foundation for a new doll line. These dolls were very different from Barbie; they had an exaggerated, cartoonish appearance. Their clothing had an urban street vibe and reflected more of what modern girls were wearing.

Mr. Bryant presented his concept to the Mattel team, which wasn’t interested. For whatever reason, it wasn’t a fit for Mattel at that time, and so the team chose not to pursue it. Carter was unfazed by Mattel’s rejection and decided he would create a prototype of the dolls on his own time. After hours, he used some of the people he knew in the firm to create some basic mock-ups of what the dolls would look like. When he was satisfied that he had enough groundwork laid, he took the doll concept to a smaller toy company named MGA.

He told MGA that he had designed the dolls in his free time and on his own accord. MGA agreed to partner with him to make and distribute the dolls. The Bratz line was born.

Within a couple of years, the Bratz had become a billion-plus-dollar business. It was one of the greatest successes in the toy industry’s history. After Bratz saturated the market and ate into Barbie’s profits, Mattel filed a lawsuit against Carter Bryant and MGA saying that it owned the Bratz dolls because they were developed when Carter was working at Mattel. Carter and MGA rejected that notion because the dolls were developed in his free time.

The case went to trial and the courts agreed with Mattel. Mattel owned the Bratz doll line. Despite the fact that the entire commercial development of the line—including the manufacturing, branding, sales, distribution, etc.—happened after Carter Bryant left Mattel and on MGA’s dime, and the line was merely in concept form before he left the firm, he had conceived of the idea and the base of the prototypes while he was still employed there, giving Mattel ownership.

While parts of this ruling were overturned on appeal, and ultimately the verdict was overturned during a retrial, giving the line back to MGA, it is estimated that several hundred million dollars in legal fees were spent litigating this case. It has also been reported that Carter Bryant himself personally settled with Mattel privately out of court and MGA contends that the legal battle damaged the Bratz brand.

So, if you start a business which in any way was conceived during your employment elsewhere and/or used any of that employer’s resources, even just to lay the foundation, it may not belong to you. If you enjoy any success, you may be risking a major lawsuit. Mattel waited until the Bratz line had become very successful to file its claim. The more success you have, the more likely someone will come searching for pay dirt.

It is always better to test out a business before you take a full leap, but you must be careful. If you can’t work on the business while you are at work and you have limited free time, when will you have time to start your business?