Quick take
- Buyers often ask for three to four weeks of transition, while two weeks is a common minimum
- Owner dependent businesses may need more, and you should be paid for it
- Non competes commonly run two to five years with a defined area
- Write down exactly what help you will and will not provide
What Transition Help Means
Transition is the time you spend helping the new owner after closing. It may include introductions to customers and vendors, training on systems and answers to day to day questions.
Agree on it before closing and put it in writing.
How Much Time
A minimum of about two weeks is common. Buyers often ask for three to four. A business that depends on you personally can need longer.
Buyers frequently ask for more than they use. Offer less than they request, and trade extra time for price if you wish.
Pay for Your Time
If the transition goes beyond the agreed period, pay should be set in advance.
One way to estimate an hourly rate is to divide annual cash flow by about two thousand hours. A business earning two hundred thousand dollars works out to roughly one hundred dollars an hour.
What to Put in Writing
- How many hours or weeks you will be available
- Which customers and vendors you will introduce
- Which systems and processes you will teach
- How the buyer can reach you, and what is out of scope
- What happens if the buyer needs more time
Non Compete Terms
A non compete keeps you from starting or joining a competing business. Terms commonly run two to five years and cover a defined area, though everything is negotiable.
Minority partners may need to sign too. Ask your attorney how Florida law treats the agreement you are signing.
Common Negotiating Points
Buyers sometimes ask for a long non compete and a long transition together. You can accept one and shorten the other. Think about what you want to do next, and do not sign away work you plan to do.
A wide area covering the whole state may be too broad. Ask what the buyer actually needs to protect, and suggest a smaller area around where the business operates.
Part of the Price
A non compete is one of the pieces of the purchase price, so it affects the tax split. See price allocation for how it is treated.
Staying Longer
Some sellers stay as consultants, or as a qualifier for a license, as described on the contractor license page. Be clear about duties, pay and an end date.
Tell your team early enough to protect continuity, as covered in telling your employees.
This page is general information and not legal advice. Have your attorney review any non compete.
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