(Note: This post was initially published on LinkedIn, and the following iteration is a syndicated and updated version of the same.)
What is an NDA?
A Non-Disclosure Agreement (NDA) is an enforceable legal contract designed to facilitate confidentiality between parties. The contract obliges the signed parties to keep certain information, usually outlined in the agreement, confidential.
Typically, information is considered confidential if it is valuable to the business, such as revenue, a potential acquisition, or a trade secret. Breaking an NDA may give rise to a legal claim against the offending party for injunctive relief and/or monetary damages.
Incredulously, many small business owners tell us they’re not overly concerned about leaked confidential information. They’re under the misguided belief that the information used by their small business is generally known, might be inadvertently disclosed anyway, and disclosure would likely not be particularly consequential.
I know. Wow. It must be that small business owners take it on faith that vendors, consultants, and employees can be trusted not to disclose confidential information. Guess again.
3 Key Reasons Why Small Businesses Require NDAs
Small businesses require NDAs just as much as the largest companies. That’s because companies of any size don’t want their confidential business details exploited.
#1. Safeguarding Proprietary Methods & Techniques
No matter their size, all companies use proprietary methods and techniques. And small businesses are particularly sensitive to having proprietary practices stolen.
Let’s say you’ve invested considerable capital, time, and labour into a new business. The last thing you need is for a departing employee to take important aspects of your business operations, which you have struggled to build, with him when he leaves.
Without an NDA, that former employee can use your confidential information to set up his own business or sell the information to third parties. Remember, a low-level employee may have access to your small business’s critical information.
And that can be especially true in the close quarters of a small business.
#2. Safeguarding Trade Secrets During Collaborations
Likewise, small businesses often need to collaborate with other companies, and that requires sharing sensitive information. The other party may use your trade secrets if the relationship deteriorates or ends.
So, negotiating an NDA before collaboration is important for small businesses.
#3. Safeguarding Sensitive Information from Consultants
Finally, small businesses should have an NDA in place before hiring a consultant.
We often hear from small business owners: But the consultant is only being hired for a single task. That’s no reason not to sign an NDA.
Even where the engagement is limited, a consultant will still likely be exposed to valuable sensitive information that could be shared with your competitors.
We’ve been given all the excuses why small businesses don’t need NDAs: They’re unnecessary, generic, overly broad, conflicting, invite trouble, unenforceable and, oh yes, expensive.
As a company supporting the contract needs of small and medium-sized businesses, we respectfully suggest the opposite is true.
NDAs are critical to all businesses, no matter their size. NDAs are cost-effective and can be tailored to specific needs. And if you don’t have the time to create NDAs that are specific to your small or medium-sized business, we can do it for you.
Your trade secrets demand protection!