Agency Businesses: How to Stop Poaching Clients / Contractors

[Tutor]

I run a tutoring business and I haven't yet really had a chance to witness this because I haven't been contracting tutors for long enough (usually, I still do the majority of the tutoring myself). However, it is obviously a problem for any agency-type business. How I plan to deal with such issues in the future include the following:


Ensure the contractors are paid fairly
Provide incentives to the contractors for staying with the company and not taking students on privately (i.e. letting them know you trust their loyalty); not giving them clients or finding clients for them if they poach
I have a non-compete clause in my work agreement but it is very brief and to-the-point
Ensure tutors are loyal enough to resist 'temptation' from poaching clients and to always report such activity (added incentives, such as a small bonus or a gift, could be given)


What are some ways in which you or others you know who run an agency business deal with poaching contractors / clients? Do you think it is inevitable? Can you have a company with zero poachers?

I do know that some non-compete clauses can be pretty tricky to push... not every client will want to sign one, and neither will every tutor. If you are taking a large cut of the money from the tutor (or contractor) the client may feel as though they are being duped (and same with the tutor). Some companies go so far as to charge liquidation damages if one should breach the contract. I mean, if you are charging the client $45 / hr and giving the tutor $20, it doesn't seem fair to trap either party in such an agreement.

[BizAdvisor]

Perhaps what you want to implement is not necessarily a non-compete, but rather a non-solicitation agreement; in which those you hire to work on behalf of your company agrees not to solicit your company's clients or customers, for his or her own benefit or for the benefit of a competitor.

[Tutor]

Thanks.. that's actually a good idea. Also, soliciting sounds kind of 'bad,' so I think even the connotation will make the client or tutor feel like they're doing something wrong (rather than competing). That's great advice! The client gets benefits from having me as the middle man, even though they are paying more (a LITTLE bit more). I'm qualified as a teacher so I know all about the curriculum, and I send material and advice out to tutors.

[beeline_Chris]

Of course a legal agreement is a good idea. But the best protection is for your tutors to like working with you. And if you discover one of the tutors you've contracted to is particularly talented and ambitious, then find a way to promote him. If he's (she's) both talented and ambitious, he (she) probably won't want to stay in that position long term, anyway.

Your ideal tutors are going to be people who love teaching, but hate sales. People who would never want to have to find new students for themselves, and are happy that you keep their stress level low and can focus on what they are good at.

Also, if anyone starts questioning what students pay vs. what they get paid, you can easily show them that they are taking home the biggest %...between admin costs, marketing, and corporate taxes, your % is probably going to be smaller than theirs.

[SteveStrait]

Interested in this discussion.
One of my offline business is very similar and the low barrier of entry makes poaching a very common occurrence.

Legal documents is already part of my process - but I found that poaching is still an issue.
Without active enforcement (too time consuming and costly), I don't see it as a viable solution.

Tutor, post your solution if somehow you can make it work - interested in your solution.

Thanks!

[TAAccounting]

Tutor,

I hate to say it, but poaching is almost inevitable at times. But there are definitely ways to minimize the risk.

When I was first poached, I remember lamenting it to a retired accountant friend - he was 89 at the time and was having a laugh at my inexperience with dealing with poachers. He told me that poaching is as much about the person I hired as the client I signed. If I sign the client looking for the cheapest alternative, the next cheapest option that becomes available - they will jump ship and poachers know this. Poachers, on the other hand, are always looking for low hanging fruits and they will always to try to present themselves as the "cost saving alternatives".

With that lesson in mind, I took a unique approach to solving my poaching problem.When I started out (6 years ago) I charged $250 a month for bookkeeping and $500 for Outsource CFO expertise. I was perpetually poached by other accountants/tax preparers who I referred business to. There were times when I was poached by my own in-house accountants/bookkeepers who thought they could get a few easy clients.

The way I solved this was by raising my prices. I went up to $500 a month for bookkeeping and $1,000 a month for Outsource CFO (I charge $1,000 for every $1 million in revenue per month). Higher prices coupled with knowledge/expertise, personable accounting approach, and banking connections meant that I now have higher perceived value with my current/potential clients.

The clients who sign on with me wanted/needed the best and they were willing to pay my price (I now have a few that are in the $5,000 a month range and they don't blink twice about paying it). But in doing this, I eliminated the poachers primary weapon - being the cheaper alternative. I also kicked them out of the race entirely because at the lower rate, they couldn't possibly be profitable at the service level that these clients wanted on a daily/weekly/monthly basis.

Hope this helps!