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Disclosing Your Business Idea

As an entrepreneurship professor, I work closely with students to develop their business plans, models, etc.  One commonality that I find among young, aspiring entrepreneurs is their reluctance to share their business idea with others.  This protective inclination does not surprise me, as many students are worried about someone stealing their idea. Unfortunately, this is not always the best approach to take.


Aspiring entrepreneurs often face this difficult decision early in the life of their startup.  Letting people know about your business idea is a great way to conduct primary research on the demand and appeal of the idea.  Likewise, there may be a strategic advantage to disclosing your idea later in the development stage. Nonetheless, my students fears may be well founded. Disclosing one’s idea to the world runs the risk that an opportunist who will steal your business idea.  Below are some advice and considerations on When, How, To Whom and Why to disclose your business idea.


Overview of Disclosing Your Business Idea or Concept

You may have heard the logic that you shouldn’t worry about disclosing your idea, because nobody is willing to do the work to steal it.  This common refrain emphasizes the fact that entrepreneurship is 99% about personal drive. The vast majority of people, even if you make them aware of your idea or concept, don’t have the drive to turn a concept or idea into a viable product or service business. To give the aspiring business planner greater comfort, those who have the drive often lack the knowledge and means to even get started. Despite the existence of these safeguards against plan thieves, there are situations where the entrepreneur should protect his or her idea or concept from disclosure.


While most people will not or do not have the ability to exploit your idea, there are others who are well equipped and actually prone to take advantage of new ideas.  For example, you wouldn’t want to announce your big idea to a company that manufactures or deals in similar products or services.  Such a business or individual may be strategically situated to capitalize on your idea.  In fact, they may have the subjective intent to search out new ideas to implement – regardless of the origin.  So there is a need to strike a balance between bragging to the world about how you are going to be rich and successful and huddling in a corner like Gollum and his precious. I hope you pick up the Lord of the Rings reference.


A good rule to follow is to disclose your idea to others only when it offers some practical advantage to your idea development or business formation.  Disclosing information early in the idea phase can help the entrepreneur to develop the idea in a way that addresses the trust need or want of the public.  This step is often absolutely critical in assessing the potential of the idea to develop into a profitable venture.

You may also need to disclose your idea at a latter stage in the business development as part of a deal or negotiation.  As an entrepreneur you will rely on lots of people (suppliers, lenders, service contractors, employers, etc.) to develop and carry out your business operations.  This reliance generally comes on the heals of negotiation to establish that relationship.  Certain aspects of your idea will necessarily be disclosed.  In such situations it is important to measure and record the specific information that is disclosed. The key to enforcement of any agreement or understanding is through documentation.  Likewise, documenting the amount of information that you transmit to a third party may serve to protect your idea from intellectual property theft or competition later.

There may also be numerous ways in which to selectively disclose your product or idea to gain a strategic advantage.  Examples of strategic advantage is disclosing your idea in order to solicit strategic partnerships with other businesses.  Another example would be to disclose portions of your idea to creation marketing buzz around your business.

One important thing to remember is that you can disclose information to the extent you are able to protect your interest.  If you hold a federal patent, copyright, or  trademark on your idea or business concept, then you are better protected than if you are relying on general common law principles of ownership.  These property rights can be used as much as a sword as a shield. Any infringement on the rights that you have in an idea or concept may give rise to a cause of action against that person.

Aside from legal protection, trust is the next best layer of idea protection. This principle holds true in any relationship that requires the need to disclose a guarded business idea or concept.  Obviously, some relationships will be less worthy of trust than others.  You wouldn’t discuss your business idea with a known competitor without having significant protections in place.  However, you may feel comfortable disclosing your idea to suppliers who will supply the components or resources necessary to carry out or bring about the idea.  The concept is completely subjective and any generalities should be ignored. Only you can assess who is worthy of your trust and who you should keep at arms length.

Bottom line, always be cautious when broadcasting your business idea to the world early in the development.  Your ability to laud your concept will come as you develop the idea and establish some form of protection, such as a patent or other competitive advantage factor.  Follow the above advice and best wishes on your venture.


The Business Professor

The Business Professor provides free business and legal resources for entrepreneurs and small businesses.

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