The Dragons have struggled in the RaboDirect PRO12 this season but have a chance for some much needed respite as the LV= Cup begins this weekend with games against Bath Rugby and then Northampton Saints.
The Welsh region's poor recent form has been highlighted by the fact that only Toby Faletau has been picked for Wales - although Lydiate would have been selected if not injured - compared to five last season.
And Beale is only too aware what it would mean for the club if Lydiate moved on.
"I have had discussion with Danny and discussions with his agent and further down the line a decision will have to be made with both parties," he said.
"All I can do is reiterate that as a business and a region we want to keep our best players.
"Danny is out of contract and causing a lot of media attention but we want to keep Danny playing in Wales and at the Dragons.
"If we don't do that then we have not really got a good business plan going forward.
"We develop players but we have got to hang on to those players to take the region forward.
"We had five last year [playing for Wales] which was a massive boost for us as a business and as a region.
"But this year we only have Toby that has made it. Dan Lydiate would have been there if he had not picked up his injury though.
"The plus side of it is that we are only without Toby but the downside is that we have not got as much representation as we would like. But that is probably a reflection of where we are at the moment and the squad that we have at the moment.
"We have got to be confident we can turn it around. If we get to the end of the season and we don't turn our season around then that would be disastrous for everybody."
The Dragons clashes in the LV=Cup with Bath and Saints in consecutive weekends should present a fantastic opportunity for Beale's troops to bounce back.
And while many clubs use the competition as a chance to blood youngsters with internationals away, Beale admits his side cannot afford to do that.
"Historically the way we have always viewed the LV= Cup is that we have used it as a way to blood in exciting new talent," he added.
"But we need to start building some momentum. Our RaboDirect form and our Amlin form has been poor.
"It is an opportunity to start with a clean slate again so we will be looking to get some confidence from this competition and start putting in the performances and also getting the results we so desperately need.
"I think it is down to a mixture of a few things. We knew at the start of the season that we had assembled a squad of very young players that perhaps didn't have that experience at top level.
"We know that and we were quite comfortable with that.
"At the moment our confidence is lacking but we are really working hard as a group and the players are as well.
"We have got to get on with it. We are trying to play a style of rugby that we can and one that produces results."
The LV= Cup. Watch the next generation break through. For tickets and info, visit www.lv.com/rugby
63x46.png){kind=logo}