Business Plans: How to Make Sure No One Steals Your Ideas

After all the time you've spent developing your business idea, the last thing you need is for someone to steal your ideas and beat you to market. There are many instances where you'll want to share confidential information with another party. But the key is making sure that the other party will be bound to respect the confidential information you provide them and not use the information to your detriment.

Thankfully, most people you'll show your business plan to are professionals. If they think you have a viable idea, they'll want to invest in it or join your team. And in that case, it's in their best interest to keep your idea confidential. Just to be on the safe side, though, describe your product or service in your business plan, but don't include a full set of blueprints: critical data such as circuit designs or the confidential pricing with key clients.

To limit the circulation of your business plans, clearly state on the cover page of your plan that photocopying or duplicating your business plan is strictly prohibited. You can go one step further and ask that anyone who reads your business plan sign a confidentiality or nondisclosure agreement (NDA).

NDAs reached mythic proportions during the height of the dot-com boom, when most startup companies were rabid about them. But now it's important to be more discerning before requiring others to sign an NDA — you don't want it to be a barrier in an otherwise productive business conversation. In fact, venture capitalists often refuse to sign NDAs before looking at your business plan.

There are many instances when an NDA is appropriate. NDAs can help protect your company's confidential information when dealing with customers, suppliers, employees, and the press. A typical NDA requires the signer not to divulge trade secrets, patents, or other confidential information to anyone outside the company receiving the information. A written NDA is an important legal tool; if a company can prove that someone violated the agreement, the company may be entitled to injunctive relief, damages, and even compensation for lost profits.

The principal situations to use NDAs are when you wish to convey something valuable about your business or idea, but you want to ensure that the other side doesn't steal the information or use it without your approval. Here are some typical situations where a confidentiality agreement is often used:

An invention or business idea will be presented to a potential partner, investor, or distributor.

Financial, marketing, and other information will be shared with a prospective buyer of your business.

A new product or technology will be shown to a prospective buyer or licensee.

A company or individual will be providing you with services and will have access to some sensitive information in providing those services.

Employees will have access to confidential and proprietary information about your business in the course of their job.

But nondisclosure agreements aren't foolproof. Your ability to enforce an NDA depends on many factors, including the value of the information in question, how and why someone violated the agreement, and whether the information is available from other public sources.

At the very least, the NDA will prove two things: You're serious about protecting your intellectual property rights, and you expect the person signing the agreement to respect your rights.

When you draft an NDA, consider what's truly valuable to your company. If your NDA covers the wrong items, it won't do much good. Make sure your NDA specifies what the person signing should not disclose. A vague NDA is much more difficult to enforce. And make sure your NDA identifies all parties to the agreement, along with the starting date and length of nondisclosure.

Check out some sample Confidentiality Agreements and NDAs at the Forms and Agreements Center of AllBusiness.com.

Copyright by Richard D. Harroch. All Rights Reserved.