Disclosing Your Business Idea

Cite this article as:"Disclosing Your Business Idea," in The Business Professor, updated July 17, 2014, last accessed July 16, 2020, https://thebusinessprofessor.com/lesson/disclosing-your-business-idea-2/.

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How guarded should an entrepreneur be in disclosing his or her idea?

It depends on how secure your idea is protected and to whom you disclose the information. 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. At the same time, you run the risk of presenting your idea to an opportunist who will steal or compete with your 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 emphasis the truth about entrepreneurship, it is 99% effort.  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. Unfortunately, there is a great deal of truth in this statement.  Most people either do not have the knowledge, means, or drive to start a business or create value around a new concept or idea.  However, you have to understand that there are situations where you should do your best to protect your 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 magic ring (I hope you pick up the Lord of the Rings reference).


Determining When to Disclose Information About Your Idea

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 state 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, if not the entirety, 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.


Disclose Information Strategically

Above we mention the disclosure of information to gain some advantage from doing so.  There may 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.

The 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.


Who Can You Trust with Your Business Idea?

An important consideration in any relationship is trust.  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.


Alway be cautious when broadcasting your product, service, or idea 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.

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