A business plan Non-Disclosure Agreement (NDA) is a binding document that prohibits parties from disclosing certain information to third parties.
In other words, when you give people access to certain information, getting them to sign an NDA means they cannot share that information with anyone else, protecting your confidential information.
As a business owner, it’s important to protect your business plan. So, it’s common for businesses to draw up an NDA to protect their business plan when sharing it with certain people – this could be employees, contractors or partners.
When thinking about an NDA for your business plan, think about the following:
- How much confidential information will my business plan contain?
- Who do I plan on sharing my business plan with?
- What will happen if my confidential information is shared with unknown third parties?
- What is the nature of the confidential information in my business plan?
Having an NDA for your business plan is one of the main ways to protect your business’ methods and internal processes. So, how does it work?
In this article, we’ll go through business plans, NDAs and other potential ways you can protect your business.
What Is The Purpose Of A Business Plan?
A business plan is the blueprint of your business venture. It contains all the original ideas, research, data, actions and systems that make up your business.
Essentially, it acts as an internal guide for key personnel in your business so everyone is clear on what the business aims to achieve, relevant deadlines, required resources and milestones.
The business plan is also likely to change and be updated as the business progresses.
So, it’s intended to be a very accurate reflection of what the business is doing and what it plans to achieve, as well as the specific processes followed to reach those goals.
This is something that is drawn up before the business has even started, so business owners have a clear plan on what to do and what options they have, depending on how things pan out.
A key benefit of creating a business plan is that it allows you to identify possible challenges. This way, you can prepare your business for any mishaps.
A well prepared business plan will often include:
- Marketing strategies
- Market research
- Financial plans and goals
- Objectives of the business
- Information regarding the product or service
Why Do I Need A Business Plan Non-Disclosure Agreement?
A business plan NDA will make sure your plans don’t end up in the wrong hands (for example, a competitor!).
Once you have shown your business plan to someone, there is a chance they could use your ideas to fuel another business. In this case, an NDA will protect the information in your plan.
The agreement is a legally binding contract. Therefore, if certain information in your business plan is shared against your will, the NDA gives grounds to take legal action for the damage caused.
When Do I Use An NDA?
It’s not often you would allow people to see your business plan. Realistically, you’d only show this kind of information to key personnel in the business, so they know the game plan.
However, there are certain occasions where it’s important. Showing the business plan can sometimes be a necessary step in advancing your business or allowing others into it. For example, think of the following people:
- Financial advisors
In this case, before you hand over your business plan, ensure that an NDA agreement has been signed. It’s always wise to take these kinds of precautions when dealing with information that is crucial to your business’ success and competitive edge.
Ben needs investors for his new business. Taylor is looking to invest, however she will need to see Ben’s business plan prior to committing any further. Ben agrees and has Taylor sign a NDA prior to giving her access to his business plan.
Non-Disclosure Agreement Vs Confidentiality Agreement
Both NDAs and Confidentiality Agreements aim to protect privacy. In fact, in most cases, they can be considered the same thing.
However, a Confidentiality Agreement may be preferred where a higher level of secrecy is required. For example, an NDA can prevent parties from disclosing information that is not yet released to the public.
A Confidentiality Agreement, on the other hand, can protect highly sensitive information that is to remain classified and not intended for the public at all.
A senior engineer hires graduate engineers to help her work on a project. Prior to hiring them, she makes them sign a Confidentiality Clause to prevent them from talking about the project to anyone else.
In a similar yet different situation, a writer is hiring an artist to design the cover for their latest publication. In order to design a fitting cover, the artist will need to read the book to get a sense of what it’s about.
Prior to handing them the manuscript, the artist is requested to sign an NDA. The artist cannot disclose the contents of the publication prior to its release.
Why Is Confidentiality Important?
Maintaining confidentiality is extremely important in business. If you have taken the time to come up with original ideas and plans, then the last thing you want is someone using these ideas to threaten your business. .
When people steal the ideas of others and make it their own, not only is it highly unethical but it can also lead to financial loss for the individual getting copied. There can also be serious legal implications.
For example, accidentally sharing your clients’ personal details to members of the public can be a serious issue as it is a breach of their privacy. You could also face consequences under the Privacy Act 1988, so maintaining confidentiality in the workplace is crucial for any business.
Can I Have Disclaimers On My Business Plan?
Yes, disclaimers are permitted on business plans. In fact, it is recommended.
An Information Memorandum Disclaimer is used when showing your business plan to investors. This is because investors will need to see what your business plans to do, but in doing so, they will have access to a lot of your sensitive business information.
The disclaimer states that all the information is intended to be kept confidential.
If an investor does view your business plans and reveals them to another, you can hold them accountable.
How Else Can I Protect My Business Information?
There are a number of ways to promote confidentiality in order to protect your business. Thankfully, an agreement exists for many of these scenarios. If not, one can always be written up by a legal professional.
We’ve listed a few of them below.
A Confidentiality Clause can be found in various types of contracts. The clause can require others to maintain a level of secrecy when working on something or within an organisation.
Generally, confidentiality clauses are inserted into contracts where the arrangement requires the collection of sensitive or private information, as this compels the person to keep it classified.
This is also consistent with requirements under the Privacy Act, which prohibits the disclosure of personal information without the consent of the person.
For example, a restaurant owner and don’t want your staff revealing any secret recipes, a confidentiality clause is also applicable (this is also known as a trade secret).
It’s important to seek the advice of a legal professional to ascertain the best way to maintain confidentiality in your business.
Non-Compete Agreements are useful for ensuring that any former employees, contractors or even suppliers do not set up a competing business in your industry. This is particularly dangerous as these parties are likely to have valuable information from working with you (for example, client lists).
A non-compete agreement can place geographical or product limits on these parties so they cannot compete with your business using any resources or knowledge they have obtained from their commercial relationship with you.
Generally, NDA’S are given from one party to another. However, in cases where both parties mutually agree that a level of privacy needs to be maintained, they can create a Mutual Non-Disclosure Agreement.
This will work the same as a typical NDA, however, in this case all parties are equally responsible for ensuring nothing private is shared with parties external to the agreement.
As a business owner, privacy is often one of your biggest concerns. However, there are circumstances under which disclosure of internal information and business plans is required.
In these cases, it’s worth having a lawyer draft an appropriate NDA for your business plan, as this could minimise any risks of heavy losses or disadvantages for your business.
As a business owner, it’s important to:
- Manage the most important and confidential documents, like your business plan
- Have disclaimers and processes in place for when these documents must be shown to another party
- Consult a legal professional about protecting confidentiality within your business as an overall practice
If you would like a consultation with our privacy lawyers regarding NDAs for your business, you can reach us at 1800 730 617 or email@example.com for a free, no-obligations chat.
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