Whether your business has been operating for decades, or you are excited about a fresh idea under development right now, you need a Non-Disclosure Agreement.
In movies and TV, I know it seems like Non-Disclosure Agreements (NDAs) are only for famous people and top-secret projects. The reality is they are a critical document to protect your business. They don’t have to be complicated, but they are essential.
What is a Non-Disclosure Agreement?
A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement, protects sensitive information about your business. The agreement contained in the NDA gets the recipient of the confidential information to agree not to disclose the information to anyone else.
Sensitive information about your business is information you provide to another party in confidence, valuable and not in the public domain.
You will share your ideas with others
You will need to share ideas, concepts, finances, and more with those you (hopefully) trust at many stages in your business. Having an NDA in place with people you share this information with will give you the confidence to speak freely, share your ideas with enthusiasm or present new concepts for your ideal customers.
You can’t get everyone on a Facebook group to sign an NDA, so think carefully before sharing this sensitive information there. Not everyone is a good advisor.
An NDA with your business advisors and service providers also reminds you to speak about sensitive information with the people you need, not simply anyone.
Agreements create strong relationships
I have a coach, a mentor and a team (who, more often than not, are great advisors too!), and I have an NDA in place with each of them. I am sure they would all say that the agreement hasn’t negatively affected our relationship, and in practice, it builds trust and confidence.
Trust is a critical component of any solid commercial relationship; an NDA makes it easier to get there faster.
Clarity is key
Suppose you do not use or have an NDA when you are sharing private and sensitive information. In that case, the party that received that information is at liberty to do whatever they like, including setting up a competing service, selling your business secrets to a competitor, or making the information public.
NDAs don’t have to be a long and drawn-out, complex document – a well-drafted one will cover your business specifically and put anyone you are sharing your business information with on notice as to how you want that information treated.
Some businesses will be more complex, however for most startups, the key thing to be addressed is, what can people disclose to others about your business?
The clarity in these relationships for potential investors (genuine or otherwise), service providers and mentors/coaches mean you can focus on what you need to address, not whether or not the person you are talking to will steal your new idea.
It is wise to have an NDA when setting up a new business, developing your business, or having business development discussions with a third party.
You will use the NDA to protect information about your business, including
· Business ideas
· Business plans
· Marketing plans
· Concepts in development
· Financial information
· Formulae and recipes
· Research results
· Software programs
Prepare an NDA and provide it for signing BEFORE you enter into substantive discussions with service providers and potential investors.
I have developed a simple Non-Disclosure Agreement template to help small business owners and startups protect their businesses, which you can instantly download and edit here. If you are unsure how to ask people to sign an NDA, send me an email, and I will give you my tips.