How Do Non-Competes Factor in When Valuing a Business?

As part of our business series, a recent session of ExecuNet Master Class focused on valuation and financing strategies for private business acquisitions. Led by Aaron Paul, President and Founder of Acquisition Finders, the program explored what someone with no background in business acquisition needs to know.

Watch How to Value and Finance a Business Acquisition to hear Aaron Paul talk in detail about these topics.

One of the questions that came in for Aaron was: “Is it typical for sellers to sign non-competes, and is that a point of leverage when it comes to valuing the business?”

Here’s some of what Aaron had to say: “Yes they always sign non-competes, usually 3-5 years. We don’t really have any issues with that. The sellers are usually in their 60s and are not going to come back into the business. It’s an assumed asset that you’re going to buy. When I offer them a value for the business I am not going to pay them anything extra for a non-compete. Part of what I’m buying is the security of knowing they are not going to compete with me and take your clients with you. It’s kind of a given in the whole process.”

Listen to Aaron explain it himself in this excerpt from the Master Class:

William Flamme

William Flamme

William Flamme is ExecuNet's Marketing Content Manager, where he is responsible for developing engaging career, job search, and leadership insight and delivering executive-level content across the various properties under the ExecuNet brand. Prior to joining ExecuNet in 2008, Will earned a master's degree in education and taught fifth grade and sixth grade. As a teacher, he deepened his appreciation for the written word and mastered skills necessary for managing writers who sometimes view deadlines as homework.

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