One of my favorite personal finance blogs, Free Money Finance, posted an interesting article yesterday on when it’s not a good idea for successful executives to start a side business. The gist of the argument goes like this:
Starting a side business can be very lucrative, but it’s also eats into your valuable free time – the time you have for pleasurable activities. It’s important to know the value of free time to you. If the money you can make at your side business is less valuable to you than your free time, then don’t start a side business.
Makes perfect sense. I’d like to offer one more time when starting a side business is a bad idea: when your work product could potentially belong to your current employer.
Imagine that you work for a software development company and you decide that you have enough knowledge to develop, market, and sell your own software on the side. If your employment agreement specifies that any inventions you create while employed with the company belong to the company or you signed a non-compete agreement, you could open yourself up to liability. The company might own what you make by virtue of your employment. It has leverage to shut down your company if you are competing against your employer’s offering. And, worse yet, you could be out of a job for violating the terms of your employment.
I’m not suggesting that you shouldn’t start a side business. In fact, it’s a great idea if you have the entrepreneurial drive and the resources to do it. If you are employed, however, carefully review the commitments you’ve made to your current employer before starting out on your venture.