This post is the second in a five-part series on what you—the entrepreneur—should be working on right now. (Read Part I). The basic idea is simple: You should be increasing the value of your company by treating the company as a product that you want someone to buy.
A potential buyer of your company would likely want it to be easy to operate and have products that can be defended from competition‑which are characteristics that should appeal to you too! Trade Secrets address both of those concerns.
What Are Trade Secrets?
A Trade Secret can be anything that is not known outside your company, but because you know it you have an advantage over your competitors. Trade Secrets are a form of Intellectual Property, so if you take reasonable steps to protect your secrets, the state and the courts will help you if someone steals them, or tries to. Trade Secrets are not as sexy as the registered forms of intellectual property, that is Patents, Trademarks, and Copyrights, but they do sometimes reach the news. Recently Nike sued some former employees for taking secret plans for new shoes with them to Adidas. And every now and again someone tries to steal the secret formulas to Coca Cola.
What You Should Be Working On
Government protection of your secrets is not even the most important reason to have Trade Secrets. In fact your Trade Secrets are absolutely the most important form of intellectual property you have, because Trade Secrets include such fundamental things as your client list and the internal processes you use to run your company.
Very few entrepreneurs spend enough time developing and improving their internal processes. Too many entrepreneurs—especially tech entrepreneurs who just got an infusion of capital—take bad advice and try to hire “the best people” who supposedly will define their own jobs. What you should do is focus on creating bullet-proof internal processes then train highly loyal people to perform those processes.
Obviously a manufacturing process must be well defined and should be kept a secret from your competitors. But even mundane tasks should have their own processes. For example consider your method of handling all the contact information you take in through networking. How much time would you (or have you) save by offloading that to an admin who is well trained?
You don’t have to be an expert in every detail to establish your own internal processes, and you don’t need a lot of employees either. Consider engaging a mentor, consultant or business coach on a short term basis to help you with specific internal processes.
Once you have established internal processes keep in mind that those highly loyal people you train to implement your internal processes don’t have to be your employees, they might be independent contractors. Yes, you can have Trade Secrets that are known to people outside your company, as long as those independent contractors are informed that your processes are your valuable property and those contractors will be held accountable for unauthorized disclosure (see the use of Non-Disclosure Agreements here and how they fit into your plan of secrecy here).
The Psychological Advantage of Property
It is obvious that internal processes should be kept secret, and everyone would agree that your client and prospects lists should not be shared outside your company. So why do I suggest that you treat your secrets as property?
A psychological conversion takes place when one starts to think of an object as their property. People take pride in property they consider to be at least partly their own. People seek to improve their property.
Consider again those internal processes you developed. Wouldn’t it be great if the people implementing them were motivated to offer you suggestions to improve those processes? If you treat all the things that go into making your company as property, and you plan for and respect everyone’s contributions to improve that property, your people will be anxious to contribute their improvements to work they feel that they own. People are generally happier and more loyal when their creativity is valued. Your company will run more smoothly. More importantly, your company will be more valuable to any prospective buyer…which makes it more valuable to you too!
Your Next Steps
Look around your company for processes and intangible assets that could be made more valuable, more efficient, or could contribute to more profitability. Then imagine those processes and assets as trade secrets—things that could give you a competitive advantage if they were properly nurtured and protected. Finally, communicate your desire for specific improvement to your people and solicit their suggestions. And watch the value of your company grow.
Argent Place Law, PLLC serves businesses and business owners in matters of business and contract law, intellectual property law, and succession planning, including estate planning with wills and trusts. By integrating these fields of law, Argent Place Law is the law firm For The Life Of Business.TM