Use an NDA when appropriate. In the simplest possible terms, this is a document that defines the obligations of the person you show your business plan to; or in order words, their legal inability to disclose the contents of the plan to third parties that are not included in the agreement.
These are also referred to as non-disclosure agreements or NDAs. They are designed to protect all parties in a business arrangement and are standard with all kinds of professional transactions; business plans included. These will be an essential part of your business for as long as it exists, so if you’re not familiar with them – now is the time.
How does it work?
If you were to get into the details, you’d realise that every confidentiality agreement stipulates that neither party (which includes you) won’t divulge any of the data contained or discussed in your business plan. Additionally, every NDA should also have a provision for damages; clearly stating what the party in breach of the agreement would be liable for under penalty of law. In almost every case, this is monetary damage.
Without having such an agreement in place, making a business plan is generally a waste of time. The only thing you are doing is the heavy lifting for people who will have the permission to use your plan however they see fit; though only to some extent, as they’d still have to deal with copyright law. But with a confidentiality clause in your business plan, any breach will leave you entitled to damages. Naturally, you would still have to use the proper legal channels to reach compensation, but that’s the case anyway. And without a confidentiality clause, no court would award you a single penny of damages.
When to use one?
Generally, any business plan would do well to have a confidentiality statement attached to it. While you may run a successful business in which many of its inner workings are quite public; you may still want to keep certain financial aspects of your company away from public eyes.
