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Just Zip It

A confidentiality agreement can give you the upper hand.
November 1, 2004
URL: http://www.entrepreneur.com/article/73184

According to a Spanish proverb, "Secrecy is the soul of business." You may not have the recipe for Coca-Cola or KFC's 11 secret herbs and spices, but even data as mundane as a customer list can merit protection. For the entrepreneur who wants to preserve a competitive advantage, confidentiality can be key.

Obviously, the safest course is to reveal nothing. At times, this works. Playing things close to the vest is the default position in any negotiation. At other times, it's simply impractical. You may be able to postpone certain disclosures until you've reached an agreement in principle. But there comes a moment when one party must drop their drawers. Otherwise, the deal just will not close.

Thus, a savvy entrepreneur may insist on a nondisclosure agreement. In its simplest form, it will specify what the secret is and who gets to know it. As we know, however, in real-life deal making, things are never that simple. Ask yourself:

Finally, make your confidentiality agreement a separate document. For one thing, it will allow you to negotiate secrecy before revealing anything. And if you end up having to enforce your rights in court, you'll have a better chance with a separate agreement than with one that is part and parcel of a larger deal.


A speaker and attorney in Los Angeles, Marc Diener is author of Deal Power.