2018-03-20 14:54:52 Starting a Business English Learn what stealth mode is in business, why some startups in competitive markets see advantages to this strategy, and why some business... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/03/Small-business-retail-owners-discuss-stealth-mode.jpg https://quickbooks.intuit.com/ca/resources/starting-business/small-business-stealth-mode/ What does "Stealth Mode" Mean for Small Businesses?

What does "Stealth Mode" Mean for Small Businesses?

1 min read

If you’re an entrepreneur about to launch a small business or introduce a new product, stealth mode is an option many small businesses adopt prior to going public, especially in very competitive fields. In stealth mode, you operate in total secrecy until you’re ready to officially open your doors for business or start selling your product. You execute nondisclosure agreements with contacts and don’t talk to the press or other industry members about your activities. Insiders may know you’re up to something, but they don’t know what it is until you announce it.

The primary purpose of operating in stealth mode is to keep your competitors from knowing what you’re working on and to protect your intellectual property while you secure patents or copyrights. It gives you the chance to firm up your plans, obtain additional capital, and hit the ground running.

For centuries, wine drinkers have tried to develop a product that keeps wine fresh after uncorking the bottle. Josh Makower and Greg Lambrech of the wine accessory firm Coravin worked in secrecy for nearly a decade to perfect a device that uses surgical needles and argon gas to allow wine drinkers to drink from the bottle without removing the cork. The last thing you want after working so long is for competition to steal your idea.

There are potential drawbacks to stealth mode. It can rob you of the opportunity to build a customer base. It also prevents you from testing your product with consumers, obtaining feedback, and incorporating improvements. You may spend several years working on something that’s doomed to failure.

The founders of the social gaming platform OpenKit took the opposite approach to stealth mode and announced their flagship product before they even knew what they were going to develop or had written a line of code. They were soon flooded with calls offering advice and opinions and created a buzz in their industry that gave them a huge customer base when they released their product.

You may also consider operating in public but withholding any information that could tip off competitors that you’re about to drop something new. This may seem like a safe way to walk the middle of two extremes, but it gives you the opportunity to experience the marketplace up close and incorporate your experience into your release.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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