In defence of complete honesty  
For many small business people, particularly those running a brand new start up, the question of how much information you should share with your employees and you customers is a very pertinent one. While, undoubtedly, people prefer to work for a company and buy from a company that seems to be successful, confident and on the way up, pretending to be successful when you are not can sometimes feel inauthentic. And yet, there are very few business that can afford complete transparency.
Is there a way to run a successful company with complete honesty? Here are a couple of key issues to think about.
The question of strength and weakness
We all know that it is good marketing to be up front and vocal about what your company is doing well, but what about the other stuff? Is it OK to be up front about things that your business has done badly and areas in which it has failed?
While some would argue that no business should ever highlight its weaknesses, either to employees or customers (after all, there'll be plenty of other people to do this for you), showing some humility and discussing openly the improvements you want to make gives your business more humanity. Just ensure you always couch it in positive language.
Be honest but stay on brand
The question of branding is now as important for a small start up with four employees as it is for a multinational corporation. Customers in all market sectors want a company to which they can connect and identify, even for the smallest of purchases.
So, when designing and implementing a branding strategy, ensure that it is one which is honest and in line with the real company that you run. Do not try to claim your business is something it isn't. Staying on brand if a brand is totally honest is not such a hard proposition.
Hire employees that fit with the real company
If you wish to run a more open and honest work environment, then you will have to trust your employees to be honest too. Ensure that the people you hire are happy to be part of such a business and have faith in the company culture that you want to create.
This might mean hiring based on attitude as opposed to skill. That might seem counterintuitive for a small business looking to get ahead, but oftentimes it is the mindset of the company that sees it really make a mark.