How SMB NDAs Actually Get in Their Own Way

Most small and mid-market (SMB) NDAs do not look the way many legal and business teams assume they should. After reviewing hundreds of SaaS, services, and partnership NDAs, clear patterns emerged: the provisions many teams consider “standard” or “required” often appear far less frequently in real-world contracts.

This matters because every additional clause, requirement, or restriction in an NDA adds friction. And in SMB deal cycles, friction slows signatures, increases redlines, and introduces negotiation delays that rarely create meaningful protection.

Below is a breakdown of what the data shows about how often companies diverge from common NDA expectations and what these trends reveal about how SMBs actually manage confidentiality risk.

Residuals Clauses Are Rare

Approximately 80 percent of SMB NDAs omit a residuals clause. A residuals clause allows each party to retain general, non-confidential knowledge learned during discussions. In enterprise environments, these clauses are fairly common, especially among large vendors such as AWS or Microsoft. In the SMB space, however, most companies avoid residuals because they believe the concept weakens confidentiality or creates unnecessary ambiguity.

Market reality: In practice, the absence of a residuals clause is the norm in SMB agreements. Including one often draws additional review and slows the contract process. Unless engineering or business development teams have a clear operational need for residuals, omitting the clause aligns with market behavior and reduces friction.

Many NDAs Are Not Truly Mutual

Roughly 60 percent of the NDAs reviewed are not fully mutual, even when labeled mutual. These agreements frequently tilt in subtle ways: one party’s affiliates may be excluded, confidentiality exceptions may apply unevenly, or operative protections may not mirror each other as closely as they appear.

Market reality: Mutuality is desirable, but many SMB NDAs unintentionally inherit asymmetries from legacy templates or past negotiations. Tightening mutuality can improve fairness and optics, but it is not the dominant pattern across the SMB sector.

Marking Requirements Still Appear in Many Templates

Despite the trend toward simplicity in modern NDAs, approximately 40 percent still require confidential information to be marked in order to receive protection. This is largely a byproduct of older law-firm templates that default to marking requirements.

Market reality: Removing marking requirements eliminates administrative burden and reduces the risk that an unmarked disclosure falls outside the agreement. Although more modern drafts abandon marking, its continued presence reflects how slowly templates evolve across SMB organizations.

Non-Solicitation Clauses Are Frequently Omitted

Around 70 percent of SMB NDAs omit non-solicitation provisions. These clauses restrict one party from hiring or soliciting the other party’s employees, but they are typically unnecessary at the early stage when NDAs are signed.

Market reality: Most SMB NDA discussions do not involve the exchange of personnel lists or other sensitive workforce information. Including a non-solicitation provision adds weight to the document and often triggers avoidable negotiation cycles. As a result, most SMB drafters leave it out entirely.

Indemnification Is Almost Never Included

Approximately 80 percent of SMB NDAs omit indemnification provisions. Indemnification obligates one party to cover losses arising from the other party’s breach, but in the context of NDAs, it is viewed as disproportionate and overly burdensome.

Market reality: SMBs overwhelmingly rely on equitable relief, such as injunctions, to enforce confidentiality rather than imposing indemnity obligations. Adding indemnification tends to slow signatures and trigger escalated review.

What This Means for SMB Deal Teams

The data reveals a consistent theme: SMBs prioritize simplicity and speed. Many of the provisions that legal teams fight for are simply not aligned with how most companies draft and negotiate NDAs in practice.

If the goal is to streamline deal flow and reduce negotiation cycles, the most effective approach is to avoid overengineering the NDA. A cleaner, mutual, and more predictable agreement aligns more closely with market standards and minimizes back-and-forth.

The key takeaways are straightforward:

• Omitting non-solicitation and indemnification provisions is consistent with how the majority of SMBs draft their NDAs.
• Ensuring mutuality and removing marking requirements can improve clarity and fairness without introducing additional review.
• Residuals clauses are the one area where you may encounter meaningful pushback. Include them only when there is a clear business need.
  
  

Conclusion

Most SMB NDAs get in their own way by including clauses that add risk, complexity, and negotiation friction without delivering proportional benefits. The data makes it clear that simpler, more predictable agreements not only reflect actual market behavior but also accelerate deal cycles and significantly reduce redlines.

TermScout gives you and your customers the certainty that your NDA is aligned with true market standards. By benchmarking your terms against thousands of real agreements, TermScout ensures that both sides can enter negotiations with confidence, clarity, and a shared understanding of what is typical, acceptable, and fair in the SMB ecosystem.

If you want to reduce friction, speed up deal cycles, and give your customers confidence in the fairness of your agreements, TermScout can help.
Book a demo to see how market-standard contracting can transform your workflow and your customer experience.

At TermScout, we do not just read contracts. We understand them everywhere they live.

Olga Mack

CEO

Olga is a distinguished legal innovator, executive, and thought leader specializing in the intersection of law, technology, and digital transformation. Currently serving as the CEO of TermScout.