Seller Non-Compete

searcher profile

November 30, 2022

by a searcher from Harvard University - Harvard Business School in Westchester County, NY, USA

How do you determine market rate for a seller non-compete?

Does anyone have any helpful heuristics here?

Is a non-compete compensation to the seller based on valuation for the business? Prior-to-sale seller income? Some fraction of market rate salary for a manger (if owner was acting as operator)?

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commentor profile
Reply by a searcher
from Columbia University in Saratoga, CA, USA
A non-compete simply bans the seller from competing against you in the future. It should be no cost to you if seller is serious. I have seen situation where a realtor who was licensed to sell businesses bought a restaurant for himself and he UNCHECKED the boilerplate non compete form language and the seller came right back within 6mths and opened a competing restaurant under the same brand! It is important and you should ask for it
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Reply by a professional
from Marquette University in Kirkland, WA, USA
If you're asking about the amount to be put in the. purchase and sale agreement's asset allocation talk to your attorney about it. Many attorneys have told me it doesn't matter what the allocation amount is because the allocation doesn't affect any future damages. And, the seller pays ordinary income tax on the non-compete value not capital gains so they want it low, and it's still goodwill to the buyer.
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