The non-compete clause: How do I know the seller won’t compete?

When a business owner opts to sell a business, chances are good he’s made the decision because he’s ready to try something else or retire. He’s selling because he’s not interested in getting back in it. Still, for the buyer’s peace of mind–and on the off chance the seller gets tired of retirement–typical purchase agreements include a non-compete clause.

The Non-Compete Clause

The standard purchase agreement will include a clause that prevents the seller from starting a new business that would compete with the business he sold. The non-compete clause , sometimes referred to as “covenants not to compete,” offers an assurance that the seller won’t do anything to take business or customers away from the business he is selling. It can limit a seller’s ability to start a business within a geographic area and/or set a period of time in which the seller is legally prevented from establishing a new business.

Though non-compete clauses are fairly standard in the sale of a business, your business broker or intermediary will negotiate sensible terms. Remember, most company sellers and company buyers have a similar goal in mind. For sellers, the goal is a business that can garner a fair price, which requires a healthy business to begin with. And for sellers, the goal is purchasing a business poised for future success.

Petersen Acquisitions uses a proven strategy to help you buy or sell your local, national, or international business.

Whether you’re looking to get top dollar for your business or hoping to find a successful business to add to your portfolio, Petersen Acquisitions can help!