What is a Non-Compete Agreement?
A non-compete agreement prevents the business seller from starting or working for a competing business for a specified time period and geographic area after the sale. It protects the buyer's investment in customer relationships and goodwill.
Typical Non-Compete Terms
- Duration: 3-5 years (longer may be unenforceable)
- Geographic scope: 25-100 mile radius, depending on market
- Industry scope: Specific trade or service type
- Consideration: Allocated portion of purchase price
Enforceability Considerations
Courts evaluate "reasonableness" across three dimensions:
- Time: Must be reasonable given industry norms
- Geography: Must match the business's actual service area
- Scope: Must be limited to the specific trade sold
Sale-of-business non-competes are generally more enforceable than employment non-competes because the seller receives substantial consideration (the purchase price).
Non-Competes for Trade Businesses
For HVAC, plumbing, and electrical businesses, non-competes typically cover a 50-100 mile radius (or the metro area). This prevents the seller from taking their customer relationships and starting a competing shop. Key employees should also sign non-competes as part of the transition.
Find Motivated Sellers
LegacyScout identifies owners ready to retire—not start over.
Start Free Search →