How to make your ex-boss your client: leave with a piece of the business by marketing your services to match your employer's needs.

Gone are the days of the 25-year gold watch. These days, even a five-year pin is a long shot. In corporate America, the buzzwords around the water cooler are downsizing, restructuring, outsourcing, reorganization, outplacement, layoffs - in short, job insecurity.

But not everyone is worried. Far from anticipating gloom and doom, those with the entrepreneurial impulse see opportunity in these unsettling times. These corporate managers are leaving their nest on the career ladder to start their own businesses - taking along their former employers as customers.

Nailing your former employer as a client can be a classy way to leave a company and start a new business at the same time. With an insider's understanding of how people work in that firm day-to-day, you can perceive and meet their needs. Everybody wins with this arrangement: Your employer gets a break on employee benefits and expensive retraining, while dealing with a known quantity, and you don't have to use precious time to market a key business relationship from ground zero.

Indeed, as an entrepreneur, you may enjoy a status that you never achieved as a nine-to-fiver. "People often have innovative ideas that they couldn't really apply when they were employees," explains Kimberly Reed, a sociology professor at Fairleigh Dickinson University in Madison, N.J. "When they become self-employed, they may be able to sell those ideas as a service, either as a consultant or as someone hired to do a limited project for the employer."

But be careful: A big danger is becoming too dependent on your former employer for business. If the corporation takes its trade elsewhere and you haven't built an independent client list, your firm could collapse altogether. Also, your corporate client may expect too much of you or feel threatened by your new freedom.

A business based solely on what you have been doing as an employee is also a bad move if it's something you've done but don't like, according to Alan S. Horowitz, a Salt Lake City-based management consultant who is writing a book about turning corporate experience into small-business success. "If you don't like what you're doing now, chances are you won't like it if you're doing it on your own," says Horowitz. "Being your own boss doesn't simplify matters. The pressures of running your own show frequently exacerbate difficulties."

Noncompetitive business services or project-oriented consulting in the employee's area of expertise are best suited to the new vendor-client relationship, especially if you can appeal to bottom-line concerns. According to Leon Wetzel, vice president, corporate staff at Texas Instruments who has outsourced contracts to former employees, "We're in a tremendously competitive marketplace, so the message we look for from a prospective business partner is: Here's how I can bring you a competitive advantage as a small, agile, low-overhead contractor who can do quality work for you at competitive cost.

Ken Bloom, purchasing manager at 3M, echoes Wetzel. "The best thing someone can do is identify a need within 3M that is not being fulfilled adequately, and then come up with a solution," he says. "Some areas of 3M are looking for someone on the outside to do some of the labor-intensive activities. Those who can identify a way to do that would have an excellent chance of landing business with 3M."

A few business avenues may be closed to you. Nondisclosure agreements will be the entrepreneurial equivalent of noncompete agreements that corporate employees are obliged to sign. "People have to be very careful not to be perceived as trading inside information to competitors," says Reed.

Most of all, entrepreneurs need a businesslike perspective on what their prospects are with a former employer, no matter how valued they were as employees. From the corporate point of view, the need for the employee to take the professional initiative during his or her transition to entrepreneur is hard to overestimate. As 3M's Bloom puts it: "About the worst thing an employee can do is leave 3M with a vague idea they want to do something and come back and say: |I'm going into business and want to do business with 3M; tell me what to do.'"

The best way to appreciate the risks and rewards of building a new business using connections from your old job is to listen to the people who have done it. The owners of the following companies - a public relations firm, a management training consultancy and an office products distributorship - offer valuable information, and surprising insights, on how to make your company a key customer for your new venture.

The Ties That Bind

When Harold Jackson was recruited in 1989 from the St. Louis office of Hill & Knowlton Public Relations to become Coca-Cola's manager of media relations in Atlanta, he was thrilled. This was the career move worthy of his Ph.D. in communications from the University of Michigan. "I knew at Coke I would be around a great marketing company," he says.

But after nearly a year there, he got wanderlust. "I was beginning to see I was repeating myself professionally," recalls Jackson, now 46, "writing press releases, writing speeches. And I got to a point where I realized the only job I had not had in PR was being my own boss."

Jackson transformed his discontent - and his management position - into independence. "I cultivated my relationship with the senior manager at Coke to see what my position would be at Coke in future," he says. "I started to have conversations with my vice president: What is my future (not that I want to leave)? Have I reached it yet? I did the same with the personnel people. At the end of my first year, I concluded I could stay or go; it was up to me."

At the time, Jackson was supervising the opening of The World of Coca-Cola entertainment center in Atlanta. When Coke decided to go outside the organization for PR support, he recommended that Coke hire a black PR firm. "When I sent out requests for proposals and the PR firms made their presentations to me," Jackson says, "the idea hit.

"When we got close to the opening, I said to my boss that I would one day love to have my own business. And I posed the question: If I were to go off on my own, would Coke be my client? He said he would be glad to recommend me for business with the company."

Jackson spent two months writing a business plan in his spare time, and when he went back to his boss he was ready to talk about what he could do for Coke and what Coke would do for his new company, Jackson Heath Public Relations International. His projects included writing speeches for senior managers, handling media relations with such national outlets as The New York Times, writing brochures and managing media events. Jackson Heath's revenues for its first six months of business were more than $100,000 - 97% of it from Coke.

Coca-Cola Media Relations Manager Ron Coleman says that making such a relationship work requires commitment from the company as well as the vendor. "A company must put to good use the expertise, skills, knowledge and business relationship that the employee has developed," he asserts. "Companies can also make it work by being upfront about our expectations and honest about the amount of business the employee can realistically expect to generate with the company. You don't want to lead the employee to believe that the share of business they can generate is greater than it really is."

Jackson agrees that the understanding he gained as an employee helps him to set and meet realistic expectations as a vendor now. "Knowledge of Coke and how it functioned helped me to do the job," he says. But he also knew that his run with Coke was neither indefinite nor self-sustaining. Jackson acted quickly on two fronts: cementing his working relationship with Coke and going after business independent of Coke. "Business is built on relationships", he says, "and you have to take the relationships you have when you leave a company and run very fast."

The first thing Jackson did was take his own advice and do some self-directed PR, asking a writer friend to pitch an article for the Atlanta Constitution that included a description of his new business and his major client. In effect, the story made Coke a partner in Jackson Heath's success and would have made it awkward for Coke to abandon the fledgling firm. Meanwhile, Jackson used the Coke connection to close other prospects, devoting 70% of his first year to expanding his client list. An early target was the Chicago office of Amoco. "I won a one-year contract with them," Jackson says, "for more money than at Coke, and then leveraged that into work for other businesses, banks and colleges and universities such as Morehouse."

Since he was on the road building business, Jackson hired account-service personnel right away. Within eight months, he had a racially mixed staff of eight. By that time, he "saw the cord getting ready to be cut" with Coca-Cola.

Jackson Heath never entirely lost Coke as a client. The beverage company now accounts for about 7% of the PR firm's revenue. But billings to Coke fell off rapidly in 1991 and 1992, as Jackson anticipated. "It wasn't someone saying, |Cut them off,'" he explains. "What I think happened was that human nature set in: Out of sight, out of mind."

If Jackson had not gotten clients besides Coke his first year in business, the firm probably would not have survived. Because of the tag between billings and collections, he sometimes had to tap his wife's paycheck to make payroll. Only in 1993 did he start paying himself a salary. "This has been tough on my family," he says. "I haven't had to mortgage my house, but my credit went out the window. For two years we were in the red, but now we're profitable. We made more money during the first six months of 1993 than in all of 1992."

Trading on the Past

The employment record you leave behind will affect your transition to your independent business future. "You must have a good relationship and have proven your expertise while you are with the company if you ever expect to have them as a client," says Iris Randall, president of New Beginnings, a management-training firm based in New York. "They know not only your strengths but also your weaknesses. I was with Avon for 15 years, and they knew what I could do well, and what areas in which I had to grow."

It was 1985 when Randall left Avon Products Inc., where she had been director of international sales training, and turned her spare-time management consulting into a full-time enterprise. Knowing she would need major corporate clients to succeed, she made what amounted to a formal sales presentation while she was still employed by Avon. "I talked to a senior vice president and explained my responsibility for international marketing at Avon and what I could perform as a consultant," Randall recalls. "First of all I did some background on responsibilities I had had while at the company; I had been a writer, editor, and had expertise in sales and sales training. I knew the Avon language and the importance of the representatives and the field structure. I had also been director of training in Latin America and the Pacific, and so I had background in different cultures as they pertained to Avon."

Randall proposed - in person and on paper - that she become a consultant for Avon in her areas of expertise. The formal proposal demonstrated her professionalism and understanding of Avon. It gave her something to leave with her vice president after the meeting, and it gave Avon the opportunity to avoid the expense of training a replacement.

Today, New Beginnings focuses on the personal development and diversity training of managers and human-resources professionals. Randall uses a network of some 60 independent trainers around the country to present her one-day, intensive executive seminars to such clients as the University of Nebraska, the University of Connecticut Health Center and the MIT School of Management.

Avon remains a client. According to Randall, an employee who has been an asset while at a corporation is seen as a continuing asset, someone whose background, thinking and experience can be tapped on an as-needed basis - but who does not have to be paid expensive employee benefits.

"Obviously, you don't have to continue to sell yourself," Randall says. "The interesting thing is that people pay more attention to you when you come in as a consultant than they do when you are an employee."

Randall says she works hard at keeping up her network of contacts within the company, pointing out that she didn't leave Avon to escape but to go to something. "If you are leaving a company to get away from it, obviously you are not going to be a very good consultant or trainer for them," she says. "I was leaving to go into my own business and wanted to find a way to leave comfortably. They gave me a lot when I worked for them. And my goal wasn't to leave them but to enhance my connection with them."

The friendly terms you leave on must then become part of a sometimes subtle business strategy of maintaining the connections you've made. "A lot depends on keeping in touch with the people you have worked with and not taking them for granted," says Fairleigh Dickinson's Kimberly Reed, adding that this can be difficult. "People employed in organizations often feel some envy for those who have left. So it's important in the contacts you maintain to be honest about the ups and downs in your life - not too glowing yet still upbeat. You can talk about what you're going to do for them in your new role. After all, that's what they care about - not what you're going to do for yourself."

Making The Most Of An

Unplanned Exit Package

Some employees-turned-business-owners have received business from former employers even though they left for the "wrong" reasons. Chris Floyd had worked for Xerox in Southern California for eight years, six of them as a manager of group sales for fax machines and typewriters, when in 1985 his division was absorbed in a massive corporate reorganization. Employees were given the option of an exit package, and Floyd took it.

Floyd's years at Xerox had given him a host of ready-made contacts in the paper trade. He used the exit package proceeds to start a business targeted at a then-narrow niche in the paper-supply business: fax machine supplies, which in the mid-1980s could be bought only from the manufacturers. Floyd's Los Angeles firm, Images Business Systems (IBS), made money by buying repill paper in bulk and discounting it to business users.

"It was difficult to go out on my own," says Floyd, 50. Initially, his goal was simply to replace the income from a steady paycheck. Hiring a high school student to answer the phone, he worked from his garage. As he closed more deals, he hired people to expand sales.

By the time Floyd had 10 employees and a commercial location, he had started selling computer paper, ribbons and supplies, too. In response to customer demand, he also diversified into factory-authorized maintenance service on all brands of fax machines and typewriters.

Success brought problems between IBS and Xerox. "When we began to carry fax machines and typewriters and actually competed for the same accounts," Floyd recalls, "we were not allowed into the branch even to visit. Xerox reps who had called me previously wouldn't visit me even at my home, as they had when I had been their manager."

Floyd never expected to reconnect with Xerox, especially when in 1988 he found himself bidding against the giant to supply consumables for Xerox office machines to a Los Angeles aerospace firm. At that time, IBS had grown to about $1 million in sales and had a staff of 15. When IBS, and not Xerox, got the contract, some of Floyd's old friends made contact once again - this time to offer him a photocopy-hardware distributorship.

IBS is doing about $2.5 million in business these days, and the Xerox distributorship accounts for 40% to 45% of its revenue.

"We have all the companies that do 50,000 copies and below in a territory," Floyd says, citing Xerox's ongoing reorganization. "Xerox got rid of all their salespeople who used to sell to that segment of that market. They have changed their process of delivering products to the public. They used to have a direct line; now they are going through agents. As Xerox reduces the size of their sales force, they are giving the responsibility of marketing their hardware to us."

Floyd credits his training and contacts at Xerox with much of the success he had in managing the business side of things at IBS: "I am probably where I am because of Xerox. Everything I learned, I learned in the years I was there: organizational structure, planning, review, forecasting. My previous training puts me on the same mental level with Xerox management." Indeed, Floyd makes a practice of sending all his salespeople through the expensive, but respected, Xerox sales training program.

Floyd's inside knowledge of Xerox has also made IBS "a low-maintenance distributor." He knows what person in the organization to contact directly to get something fixed.

These days, Floyd is comfortable with the arm's-length relationship between IBS and Xerox. Indeed, IBS's service division acted as a hedge during the recession, and Floyd plans for service and sales each to stand alone as profitable operations. "Others have evolved from being Xerox reps to becoming agents like I have," he says. "But most of them are really tied to Xerox. I am much more independent than they are."

"If Xerox pulled the plug, could I sever that entire sales group and still be a business?" Floyd asks. "The answer is yes. To this day, the service department is more successful because of the margin on service [80%] and the expense of training salespeople. I never thought about dropping everything else and just selling copiers, but there was a time when I thought of just doing service."

Looking Ahead

When an employee becomes an entrepreneur, the emphasis in the phrase, "former employee," is on former. That means water-cooler contact is a thing of the past. It also means performance reviews don't happen every six months, but every minute of every day on every project.

As Fairleigh Dickinson's Reed puts it: "Every contact you have made at your former employer is a potential reference for your new business. Every contact is a moment of truth for your new role as an entrepreneur. Even people in low positions can talk you up or talk you down."

And if you suddenly find yourself speaking manager to manager instead of worker to manager, you also find yourself obliged to anticipate client expectations even if the client doesn't always make expectations known or even know what expectations are realistic.

"It's the entrepreneur's job to ask questions and determine expectations," comments Reed. Plus, be sure that this occurs "in the first meeting, not once the project is under way."

In your new role, you won't have a manager up the line to catch you if you botch the assignment. In fact, employees will be depending on you to give them guidance.

As Harold Jackson says, "I've got eight people in Atlanta who wouldn't have jobs in PR if they weren't working for me."

Meanwhile, there will be more, not less, pressure on you to produce corporate-quality work on time and on budget. There won't be any overtime paid for by your client. On the other hand, you won't have to share the glory of a job well done with your supervisor or anybody else. You won't have to share the profits, either.