Non-Disclosure Agreements for Business- Your Complete Guide

Non-Disclosure Agreements for Business- Your Complete Guide

Hey Business Owner,

The first time any one of us do something new it can feel both exciting and nerve-racking- especially when there may be legal documents involved.

I’m here to tell you NDAs are super easy to use and implement and anyone can do them.

They do not require any legal training or contract background.

I encourage every client of mine to start using NDAs ASAP because the benefits for your company in both protection, but revenue growth, are worth the mini phase of uncertainty!

I’m excited you're exploring using an NDA to protect and maximize your business opportunities and hope this guide helps get you off to a great start.

Ok, let’s dive into NDA basics.

Here's What's In This Guide:

What is an NDA?

Why Do Businesses use NDAs?

When to Use an NDA (Is Your Company Ready?)

Types of Business NDAs

Key Components of an NDA

How to Create an Effective NDA

How to Get an NDA (and How Much Will is Cost)?

The Lifecycle of an NDA (There's More than just Signature!)

Common NDA Mistakes and Pitfalls

NDA FAQs

Why Do Businesses Use NDAs?

Ever shared a secret recipe with a friend, only to see it pop up on their social media later?

It's human nature to share, and it's exciting to share something new, helpful, or brilliant!

NDAs set boundaries on how to treat your information and prevent others from accidentally or intentionally using your information in ways that can harm your company.

Here's why they're essential for your business:

• Lock Down Your Secret Sauce: You’ve worked hard building your company, bringing your vision to life and making it all a reality. Think of your business as a treasure chest filled with valuable stuff you’ve built up over time – your secret recipe, customer list, financial info, you name it.

An NDA is the padlock that keeps those treasures safe from prying eyes.

Each piece of company information takes time to build and compile, meaning there's value in someone reusing it elsewhere.

I know someone who hired a CPA to help keep his books in order only to learn that the CPA pulled the list of all his clients and sold it on the side.

He’s not sure if the CPA was intentionally being malicious, or just saw a business opportunity by using his client’s customer lists, but it lost my friend money and clients.

• Stay Ahead of the Competition: You've worked hard to create something unique, so don't let others copy your success. An NDA helps you keep your edge by preventing others, like customers who are shopping around, from using your ideas without permission.
• Keep It Hush-Hush: Whether it's an employee, contractor, or business partner, not everyone needs to know everything. NDAs create clear boundaries about who can access your confidential info and what they can do with it. It protects others from monetizing, selling, or building your ideas as their own.
• Have a Backup Plan: If someone breaks the rules and shares your secrets, an NDA gives you legal options. You can choose how you want to proceed. Without an NDA, you may be left feeling a sting without choices on what you can do to stop it or recover from it.
• Build Trust and Credibility: When you use NDAs, it shows you're serious about protecting information. This builds trust with partners and clients, making them more likely to want to work with you. It shows you do things the right way and play like an industry leader.
• Get Paid What You're Worth: Sharing ideas with potential investors or partners? An NDA helps you negotiate better deals by ensuring you get fair compensation for your intellectual property. If an investor can tweak your idea because you shared it without protection, why would they invest in you? The same applies when investors evaluate your company. If they see you've kept the good business details under wraps with NDAs, they feel confident the secret sauce is still secret, and they are more likely to invest.
• Protect Your Customers (and Yourself): If you're working with freelancers or sharing customer info with suppliers, an NDA helps you stay compliant with privacy laws and protect your reputation. It also helps you stay compliant with your customer agreements.

If you signed terms of confidentiality with your customer and then give the customer’s information to a freelancer for a project without an NDA or similar terms, you're in breach of your customer agreement and could be responsible for the fallout.

9 Ways NDAs Can Increase Business Revenue

When to Use an NDA: Is Your Company Ready for a Non-Disclosure Agreement?

Any time you share anything that may be of use, value, or sensitivity to yourself or your business you'll want to use an NDA.

Why? Because there is no protection without one.

Other than protections you may have under intellectual property laws, everything else about your information can be used, shared, sold, etc by the other side unless you have terms protecting it. 

Whether or not to use an NDA has nothing to do with the price tag or value of your company or even the value of the information.

It is only about if the information is something you want in the public or sold or used by the others side without limitation.  

Are you 100% ok with the information you're sharing being publicly available without limitation? If not, you want an NDA.

Some intellectual property (IP) laws offer protection against copying, but even IP laws don't give the full protection of an NDA.

NDAs are the most common business agreement and this is due to their simplicity and ease of use, but also the value they offer in every business dealing.

Here are some common scenarios where using an NDA is a good choice:

• Before sharing business ideas with potential partners or investors
• When hiring new employees
• When working with contractors or consultants
• During mergers and acquisitions
• In any situation where confidential information is being shared
• When pitching and onboarding customers
• Sending information about your business or any business files to suppliers

I hear clients say that they only do business with people they trust- but here's the thing- 

No one does business with people they don’t trust!

No one will protect your hard work like you do.

The key is to remember is that even though you trust the person you are doing business with today, three important things change over time:

1. Customers and vendors may love the ideas you have and support you, but they can’t be emotionally connected to it the way you are.

They also will put their life’s work above yours.

It’s not mean; it’s human.

We all work hard to bring our value to life and take actions to support that- even if it sometimes means we may accidentally or unintentionally do something that harms someone else.

2. The more you share your information, your risk for exposure aggregates.

Each customer conversation adds up, every supplier sourcing situation piles in too, and then what about sharing with your accountant, business partners, and investors?

They all add up.

A single conversation may or may not be risky, but the more your business builds, the more you business information is out in the world.

And not just with a single partner, but how all your customers and all your vendors and partners add up over time.

Some info gets out here, then a little leak there- The question is was it protected along?

3. People represent businesses, and people come and go at a business.

The person you’re doing business with may move to a different role or change companies, and your information is still in the hands of the business.

Client Story:

This happened with a client. Their customer hired a CFO, Chief Financial Officer, to look for ways the company can maximize revenue and lower costs.

When the CFO found the agreement his company has with my client he noticed the company could do more with the information they had without paying anything extra.

So in a smart business decision, the customer started expanding their use of the information cutting costs and boosting revenue.

However, these expanded uses conflicted with my client’s business goals.The uses even cannibalized their next product rollout!

My client was furious at their customer!

Because the agreement was with the company, not the person they were doing business with, there was nothing they could do to stop their customer and the new CFO from abusing the information while the contract was active.

The sooner you implement NDAs into your everyday business workflow, the sooner you’ll get the benefits and protection of using one.

Need a Custom NDA in under 15 Minutes?

Check out NDA Today

Types of NDAs for Business

There are two main categories of NDAs:

• Category 1: Unilateral NDAs: These are one-sided, protecting only one party's information (common in employee-employer relationships).
• Category 2: Mutual NDAs: These protect all parties' information (common in business-to-business dealings).

For a complete guide on types of NDAs for Business click here. 

Category 1: Unilateral NDAs

Unilateral NDAs are one-sided, hence the name unilateral. Common in employee-employer scenarios.

Unilateral NDAs only protect one party's information, which means only one party benefits from the protection. The party disclosing information has no obligation to safeguard the other side's information they may receive during the relationship.

The most common use of unilateral NDAs in business is employee-employer NDAs because the company's information is being accessed by the employee and the employee is the one promising to safeguard that information.

Unilateral NDAs can appear in business relationships too, like with suppliers or customers, but I’ve always advised against it because every business-to-business relationship ends up being mutual at some point in time.

There's no such thing as a one-sided business partnership even if it starts that way.

This is why unilateral NDAs are often used in the employee-employer context for businesses and only occasionally used elsewhere.

Category 2: Mutual NDAs

If Unilateral NDAs are one-sided, then mutual NDAs protect all parties' information. The reason they are called mutual NDAs and not bilateral NDAs is that when we use mutual NDAs, both parties get the same protections and obligations.

The terms are considered mutual or equitable..

With NDAs, the only item at issue is sharing information and protecting it.

So, it makes sense that both parties have the same protections for the same situation if both parties' information is involved.

Mutual NDAs are commonly used for any B2B (business to business) dynamic like use with customers, suppliers, vendors, investors, freelancers, and so on.

Mutual NDAs can have more than 2 parties!

Because Mutual NDAs are equitable, there may be more than two parties involved!

It's not common, but there are three-way and even 4-way mutual NDAs. 

An example would be if 2 suppliers were working together to complete an item for the shared customer. To complete the project, all three parties' information would need to be exchanged.

There would likely be the customer's information as well as both suppliers involved, so they would all sign the same NDA rather than have multiples for each company.

It would still be a mutual NDA because everyone would have the same mutual protection, but we'd call it a three-way mutual NDA because there are three parties signing it.

Looking for a Mutual NDA for your business relationships? Check out NDA Today! Have a customized ready to use NDA in minutes. 

Key Components of an NDA. What to Include. 

NDAs are pretty simple document because they are about one thing only: protecting information from disclosure and misuse. 

So there are some common sections that will be on every NDA no matter the NDA type or use case:

Definition of What is Confidential Information:

Under the law, anything that is non-public information and treated like confidential information can be classified as confidential information on an NDA. This means there is no standard definition of confidential information to use on an NDA; it's up to the parties to decide what is and is not confidential in their business and scenario.

Exclusions from Confidential Information:

What is not considered confidential information is called out by being excluded. While it can be tempting to try to include as much as possible in the definition of confidential information, it is impractical to do so. There are 4 key exclusions from confidential information that a properly drafted NDA will have listed automatically to accommodate for these practicalities:

1. Publicly Known Information: Information that is already generally known to the public or becomes publicly known through no fault of the receiving party.
2. Information Already in Possession: Information that the receiving party already possessed before it was disclosed under the NDA.
3. Information Received from a Third Party: Information that the receiving party rightfully receives from a third party without any obligation of confidentiality.
4. Independently Developed Information: Information that the receiving party independently develops without using or referencing the disclosing party's confidential information.

Obligations of the receiving party:

Ok, so you've said what is and what is not confidential information, but what can and can't be done with that information? That's what will be answered in the obligations portion of the NDA.

• What standards should the confidential information be treated with and for how long?
• Who can and can't the information be shared with?
• Are there any privacy or data security standards for the information?
• What is it okay and not okay to use the information for?

The obligations portion of an NDA will lay out the standards for how the information shall be treated during the term of the NDA.

Remaining Sections of a Business NDA:

I like to call the remaining portions of an NDA the "time and money-saving sections" because that is what they do. Should something go wrong, someone needs insight on how to proceed with something or, heck, you end up in court, having the remaining sections well-drafted will save you 6-figures easily.

The most common sections of these are:

• Choice of law and venue
• Remedies for breach
• Severability clause
• Intellectual property ownership
• Waiver of Warranties

What is an NDA and Why is It Important for Business?

How to Create an Effective NDA

No one writes anything from scratch if they don't need to – the same goes for lawyers and companies with NDAs.

So it's normal and okay to start from templates.

The key to any good contract is that it be

1. The right legal template for the use and business type and

2. The template be tailored to the business and scenario.

Legal template:

NDAs are used in many areas from court settlements to celebrity dating, and you wouldn't want terms for those situations affecting your business.

Because of this, it is imperative not to use a generic NDA template.

Customization.

While templates are a great starting point, they are not customized for the specific business, business model or relationship dynamic. 

Which means, your business and business dynamic are not protected yet. 

Customization is what gives you and your business dynamic protection. 

Templates are only the structure. They do not include details. 

Which is why I do not recommend copying or using an NDA you've come across in your business.

I see this in businesses starting out, they "borrow" from an NDA that's come across their desk.

That NDA was customized for someone else's business model, details, legal requirements and information, not yours. 

Not only will it be missing what you need, it may list legal things in opposition to your needs. 

Even using your competitor’s NDA is a no-go because they are set up internally differently than you are. They have different supplier and customer structures not to mention, they lack what makes your company great. 

Don’t fret, getting set up with a proper and effective NDA that is tailored to your business is easier than you think:

How to Get an NDA and How Much Will It Cost?

There are three key ways to get an NDA:

1.  Use a generic  template:

   I just got done talking about not using generic templates, and here I am saying you could use one, but you do get what you pay for.

•  Generic NDA templates often miss key sections and statements that apply to businesses and different business scenarios and may not include the type of information you want to protect.

• Customizing a generic NDA is still needed for success. If the template is poorly worded, it may costs more to fix or customize a generic template. 

• Generic NDAs are better than nothing, but if something goes awry, the generic wording can lead to deeper losses and litigation – which is really what you're trying to avoid anyway.

• Pros: Low cost.

• Cons: Overly generic terms often miss areas of protection for businesses and different scenarios. Lack customization. No guidance in how to use or implement it. 

• Costs: Free-$150

2.  Legal Coaching for Business NDA:

Legal coaching is new for businesses and business owners are loving it!

Legal Coaching takes the experience of a trusted advisor, like an attorney or contract specialist, and combines that with lower cost and the entrepreneurial approach of doing it yourself.

A legal coach may walk you through customizing or updating an NDA template and then guide you on how to reuse update it so you can handle things yourself moving forward. 

Its like a lawyer + business coach all in one. 

•  Legal coaching also sets business owners up for continued success, so they pay once upfront but learn how to avoid repeat fees and handle things themselves – hence the coaching element.

• Business owners who choose legal coaching report feeling more confident and comfortable in what their contracts say and do for their business, and in how to use them successfully without law firms.

• Pros: Custom-tailored NDAs for your business, professional guidance, and support for NDAs. Reduces or eliminates long-term NDA fees.

• Cons: Business owners need to be willing to participate to learn how their contracts fit into their business vs a law firm that will just do it for you.

• Cost: $97-$750

Interested in NDA coaching? Join my NDA Group Coaching program for business owners HERE. 

3. Law Firm Created NDA:

For business owners who want the done-for-you approach to NDAs, law firms are the traditional choice.

•  Law firms have a set of templates on hand and they can customize one for your particular business and use case.

•  Law firms, however, keep the value and "how" elements behind closed doors. Each time you may have a question or want to update the NDA for use in a new scenario, you'll need to reach out to the law firm again and often pay another fee. This can be expensive over time but also ensures your NDA is backed by attorneys.

• Pros: Law firm backed NDA documents and support.
• Cons: Highest price and repeat costs for each new request.
• Costs: $750-$1500.

Need a Custom NDA in under 15 Minutes?

Check out NDA Today

The Life Cycle of an NDA- There’s More than Just Signature!

It is common to think that once a document is signed, it can be put on the back burner.

There's one added requirement with NDAs: The End (via termination or expiration) AND there are other optional phases. 

Every NDA has a lifecycle of pre-signature, signature, active period, and an end. Some NDAs also have a breach period or require updates and changes after they have been signed.

• Phase 1: Pre-signature: This is getting the template put together, like customizing it and navigating redlines or negotiations.
• Phase 2: Signature: Signature by both parties turns the template into a legally binding document (minor exceptions for unilateral NDAs).
• Phase 3: Active Period: This is when the NDA is live and active. The active period is when parties may exchange information and is the term when the information remains protected.
• Phase 4: The End: All good things must come to an end. Many NDAs will naturally expire when the term is completed while others will end by being terminated.
• Termination means it was brought to an end before the term timeframe passed.
• The end is a vulnerable time with NDAs because the information that was shared is no longer protected AND there may be obligations triggered automatically that the parties have to take or they risk being in breach of contract. The most common obligation is a certificate of return or destruction.
• Most business owners are unaware of this, so be sure to keep track of your NDA end dates. The end is often overlooked, but it is as critical as entering into the NDA in the first place.

Some NDAs also face two other phases:

• Amendment/ changes. This could come at any point between the signature and end. Updating

and changing a signed/ legally binding contract has legally required steps, but is super easy if both parties agree on the changes and updates.

• Breach/ threatened breach. The point of an NDA is to prevent leaking and misuse of your information.

A breach or threatened breach is the exact scenario business owners want to step up and take immediate action to stop and recover from.

It is not a time to ‘see how it goes’.

Without a signed NDA, a business owner has little to no steps they can take under the law to stop or recover from a breach.

Want templates and action steps for every NDA phase? Check out NDA Happily Ever After. 

Common NDA Mistakes and Pitfalls

Even if you're not a lawyer or legal coach, you can still create a solid NDA. But watch out for these common slip-ups:

• Being Too Vague: Don't just say "everything's confidential." Instead, list the specific things you want to protect – like product designs, customer lists, or your secret sauce recipe. This is like putting up a fence around your valuable information.
• Setting Unrealistic Timelines: Don't try to keep things secret forever. Choose a reasonable timeframe for confidentiality – maybe a few years, or until the project is finished. Think of it like the "best by" date on a milk carton.
• Forgetting the "Oops" Factor: People make mistakes. Your NDA should say what happens if someone accidentally spills the beans. This isn't about punishment, it's about having a plan in place- an action plan. 
• Skipping the Signature Step: This one's simple: make sure everyone involved signs and dates the NDA. This is like the final handshake that seals the deal because its not legally binding without the signatures. 

By avoiding these common pitfalls, you're well on your way to creating an NDA that protects your business.

And remember, if you need help, don't be afraid to ask a lawyer or legal coach. They can be your trusted guide to navigating the NDA landscape.

NDA FAQs 

Ok here’s some additional information to help you use NDAs with success.

You can also check out more NDA videos and resources here.

• How Long Does an NDA Last?

  Think of it like your gym membership – you sign up for a specific length of time. Most NDAs last 1-3 years, but it depends on what you're protecting and how long you need it kept secret.
• Pro Tip: Be realistic about the timeframe – don't lock yourself into something too long or too short.

• Can I Modify an NDA After It's Signed?

  Once an NDA is signed, it can be updated so long as both parties agree to it. Updating it requires a signed amendment agreement outlining the changes.

• How do I ask someone to sign an NDA?

  NDAs are an everyday business ask, so I always recommend asking how you would ask for any typical business ask!
• I worked for a company that wouldn’t let its sales team have an initial customer meeting without a signed NDA. If those sales reps can get people who don’t even know what their product is to sign an NDA, you can too!

How do you ask? Ask the same way you’d ask anything else you your business:

“Hey Bob, what’s been going on? Want to grab lunch next week. Got some new features to show you”

Throw in an NDA:

“Hey Bob, excited to grab lunch and show you what’s new with the product. I’ve got some awesome things to show you so we’re asking customers to sign an NDA before. Can you sign and return the attached before then? Super excited to catch up!”

Ask for an NDA signature just like you’d ask for any normal business ask. Because asking for NDAs is a normal everyday business ask.

• What Happens If Someone Breaches an NDA?

  The consequences for breaching an NDA may include the responsibility to pay for the lawyers and investigate, cover any lost revenue and expenses, and pay for both sides of the lawsuit. It ultimately comes down to what is in the NDA, and most NDAs will have a majority of the above included.

• What Happens When the NDA Expires?

  Think of it like a lease – when it ends, you move out. When your NDA expires, the information is no longer under lock and key.

There are some key steps to take when the NDA ends:

1. Get your information back,

2. Get a certificate of return and destruction from the other side, and/or

3. Enter into a new NDA that includes the previously exchanged information.

• Pro Tip: Even after the NDA ends, be smart about what you share and who you share it with. Some information remains protected under law even after the NDA expires.

Everything You Need to Customize and Use an NDA Today

Designed specifically for Small Business Owners, this NDA Toolkit with ongoing Support and+ Live Coaching calls ensures you are set up for NDA Success Today and beyond.  

NDA Awesomeness in Hand!

NDAs are the primary way businesses of all sizes protect their information from getting into the wrong hands and being used in a way that harm the business. 

Using an NDA is as easy as starting with the right template, coach or law firm and getting both sides to sign. 

They key to NDA success in business is customization. Customizing the NDA for your information and way of doing business ensures its all protected the right way. 

I offer loads of NDA resources from group coaching to my YouTube channel to help you where ever you're at in your NDA journey. 

With Love and Awesomeness, 

CEOLegalCoach