Non-compete & transition period (90-180 days standard)

What it is

The seller's contractual promise not to compete with the business after closing, paired with how long and how actively they'll stay involved to help hand off operations, customers, and institutional knowledge. Sale-of-business non-competes are enforceable in all 50 states — a different legal category from employment non-competes, which face newer federal restrictions that don't apply here.

Typical duration runs two to five years, with three years the most common middle ground for small business deals; shorter deals sometimes land near the two-year floor, but well under that is unusual. Transition support is usually split into two phases: a short, often unpaid on-site training period (commonly two to four weeks) covering the operational basics, followed by a longer paid consulting arrangement — often three to six months, sometimes up to a year — for the seller to stay reachable as questions come up.

Why it matters

Without a real non-compete, a seller with deep relationships and know-how can open up two towns over with the same customer list, effectively competing with the business you just paid for. Without an actual transition period, you inherit relationships and institutional knowledge with no one to hand them off — a much harder problem than it sounds like on paper.

What to look for

• A non-compete shorter than roughly two years, or with a geographic radius too narrow to matter
• No defined transition period, or a seller who wants to be gone the day of closing
• Transition compensation structured in a way that gives the seller little real incentive to actually help
• Non-compete scope (industry, geography) too narrow to cover how the seller could realistically compete