A non-disclosure agreement is a legally binding contract in which one or more parties agree to keep information private. Commonly referred to as the ‘NDA’, this is the most common type of contract used in B2B businesses- and between employers and employees. Despite its commonality, too many business owners make the mistake of doing business without an NDA in place. In today’s blog, we’re going through the 3 most common situations business owners should use a non-disclosure agreement.
You should use a non-disclosure agreement when…
1.When you’re servicing a client with partnered services or paid-for software.
If you’re using your industry secrets to offer your client services or allowing them access to one of your partner’s services, you need to sign an NDA with the client. You need to make sure that your business is protected from potential leaks, as well as ensure that your partners are safe.
2.When employees have access to proprietary information.
Working in sensitive industries such as technology, accounting, and research means that employees will inevitably have access to proprietary information. From the inventory system to logins for private software, your employees are most beneficial and detrimental part of your business. Signing an NDA ensures that even if you and sales manager go head-t0-head before they quit in a storm of rage, you’re not risking your entire business from one bad interaction.
If you’re truly worried about employees leaving and becoming competitors, you may want to consider taking the NDA a step further and creating a non-compete agreement. Generally speaking, non- compete agreements ensure that an employee cannot open a rival business within a certain area and for a certain time period.
3. Discussing the sale of a product or service to another party.
Selling the code to your latest software? Ready to sell your product line and retire? Whatever the case, the first step you need to take before sitting down at the negotiating table is to draw up an NDA. Not only are you discussing the inner workings of your product or service, you’re giving the potential buyer a ‘behind closed doors’ view of your product.
Even if you trust your potential buyer, an NDA will ensure that they don’t walk out the door ready to discuss the intimate details of your product or service.
So, when you should use a non-disclosure agreement?
If you’re wondering whether or not to use a non-disclosure agreement, the answer is almost always yes. Like the old proverb goes: “Better safe than sorry.” Professional services like ours at Excellent Admin have MBA-level administrative professionals prepare contracts for clients and educate them on how to create an NDA that truly protects their business. Whether you need a one-time non-disclosure agreement for the licensing of a product or an employee NDA template- we’re here to provide.