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Transition Time and Noncompete Terms Buyers Ask For

The deal does not end at the closing table, and Dallas Business Brokers Firm sees transition terms matter almost as much as price.

Know what to expect before the letter of intent.

Rather talk first? Call (214) 555-0172 on a weekday.

The short version

  1. Buyers often ask for three to four weeks of help, and owner dependent firms may need more.
  2. Put in writing what you will and will not provide.
  3. Texas enforces a seller's noncompete tied to the sale when its time, area and scope are reasonable.
  4. Tell staff close to closing, not before.

How much time buyers ask for

A buyer may ask for far more transition time than they use. Two weeks after closing is a common minimum, and buyers often ask for three to four weeks. A company that runs on the owner needs longer.

Offer less and trade extra time for price when you can.

Put the help in writing

Write down what you will provide: introductions to customers and vendors, training, and help with systems. Set the hours and what you are paid after the first period.

A simple anchor for a paid hour is annual cash flow divided by about 2,000 hours. A company with $200,000 of cash flow works out near $100 an hour.

Noncompete terms

Buyers expect a promise that you will not start a competing business. Terms often run two to five years and cover a set radius, and they are negotiable.

Texas courts enforce a seller's noncompete when it is tied to the sale and reasonable in time, area and the work covered. Have your attorney draft it. Minority partners may also need to sign.

What to offer first

Start with the smallest package that works, such as two weeks with a set number of hours, and put extra time on the table as a trade for price. Buyers rarely use all the time they ask for.

If the buyer wants you to stay longer, tie any extra time to a fee or part of the price, and write down the end date.

Staff and timing

Employees do not transfer on their own, and Texas employment is at will, so staff can leave. Most stay when pay and benefits are kept, though you may part ways with one or two.

Keep the news close to closing. An early leak risks staff flight and an exposed deal, and closing dates slip. Introduce the new owner to the team after closing.

Licenses and key staff

If your company holds a trade license, the transition may include a licensed person staying on. See the TDLR licensing guide.

For customers that follow you personally, read fixing customer concentration. When you are ready, ask for a private price range.

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