Typical Non-Compete

by a searcher from Columbia University - Columbia Business School

3 years ago

I am in the process of finalizing LOI and the owner asked how long is the non-compete. Is there a general rule of thumb for the length of time? Is it a red flag the owner asked? He is in his early 50s. The current terms are that the owner has a 12 month transition period with a non compete thereafter. Any guidance is much appreciated. Deal is $1.5M

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12 comments

investor from Nova Southeastern University

FYI https://www.politico.com/news/2023/01/05/biden-ftc-regulations-employment-noncompetes###-###-####

1 year ago | like reply | 0 likes

searcher from London Metropolitan University

Usually 2 years but you better be prepared for competition after that especially when some customers would work with the seller due to relationship reasons. He might even have your key employees join his new company. In addition, if the seller knows the industry inside out versus a newbie like you, he could drop the prices of his products or service in his new company and bleed you dry which may result in you giving up and selling the company back to him at a massive loss. I have seen this happen to my investment. Fortunately I had a put option on the new owner/ buyer and was able to exit with no loss in my capital.

1 year ago | like reply | 0 likes

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