Non-Compete Agreement

A non-compete agreement (or covenant not to compete) prevents the seller of a business from starting or working for a competing business for a specified period.

Standard Non-Compete Terms

Element	Typical Range
Duration	3-5 years
Geographic scope	State or regional
Industry scope	Direct competitors
Consideration	Part of purchase price

Enforceable Non-Competes

For a non-compete to be enforceable:

• Reasonable duration: 2-5 years typically
• Reasonable geography: Where business operates
• Legitimate interest: Protecting goodwill purchased
• Consideration: Seller receives value in exchange

Non-Compete Red Flags

For Buyers:

• Seller won't sign non-compete
• Seller insists on narrow scope
• Key employees excluded

For Sellers:

• Overly broad restrictions
• Unreasonable duration
• Impacts future career options

Non-Solicitation vs. Non-Compete

Non-Compete: Can't compete at all Non-Solicitation: Can compete but can't solicit:

• Customers of the sold business
• Employees of the sold business

Non-solicitation is often more enforceable than non-compete.