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The importance of noncompete agreements

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The Prezilancer

on 7 February 2016

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Transcript of The importance of noncompete agreements

Planning to sell your online business in the future?
Expect to sign a noncompete agreement.
"Noncompete agreements are a standard part of any final purchase agreement".
Buyers expect them.
If there is no noncompete agreement, the buyer will expect a discount
(if they are even interested).
Most buyers just walk away if there is no noncompete agreement.
Why noncompete agreements are so important?
Buyer will pay you 2 to 3 years worth of your business earnings.
If we assume that all things were equal with the business moving forward.
Buyer will need 2 to 3 years to take back their original investment.
You represent a unique and real threat!
Back to business!
Access to Information
Effective Keywords
Marketing Tactics
Customer Information
Most important, you have a track record of success in the industry.
Buyers need to protect their investment.
What should you expect?
There are 2 main parts:
Terms & Scope
Term (length), between 2 to 5 years.
Typically mirrors the multiple of the price that the buyers is paying for your business.
For example: Your business earns $100.000/year, and the buyer is paying you $300.000, expect 3 years.
"The scope defines what you can and can't do in the future".
It can be broad or narrow.
"A very unrealistic broadly scope noncompete agreement will try to prevent you from doing any online business whatsoever".
"A very narrowly scope will be very specific at what you can and can't do online, and may allow you to work in a very close niches".

Defining the scope of the noncompete agreement is extremely important.
Especially
If you have existing websites in a close niche or your future plans involve working in a neighboring industry.
If, when putting your business up for sale, you know that you will be operating in a nearby/similar or the exact same niche...
I want to operate in a close niche
It's ok
Define it in the noncompete agreement
What happens if you find yourself in a position where somebody is accusing you of
breaking a noncompete agreement?
What are the penalties if you actually break a noncompete agreement?
It depends on what the person accusing you wants to do...
Prevents you from operating in that business...
Sues you for damages...
Keep everything clear and transparent
This is why signing a noncompete agreement is so important for you and for the buyer:
Willing to sign a noncompete agreement helps you to sell your business.
Being hesitant plants doubts in buyers minds
When the buyer brings up the prospect of the noncompete agreement:
Be willing to accept it
Terms and scope are negotiable
Be upfront
Thank you
For more information on buying and selling online businesses:
https://www.quietlightbrokerage.com/blog/
https://www.quietlightbrokerage.com/sell/
For free valuation:
The importance of noncompete agreements
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Full transcript