What is a non compete agreement when I sell my auto shop, and do I have to sign one?
A non compete is a promise you make to the buyer that you won't open or work at a competing shop nearby for a set number of years after the sale closes. Buyers ask for them because they're buying your customers, and they don't want you to take those customers back. That's a reasonable concern on their side, and it's worth taking seriously on yours too.
If this sounds like youAlmost every shop sale comes with a non compete, and it's one of the things owners feel most uneasy about. You've spent decades learning this trade, and now someone's asking you to agree not to work in it for years. It helps to understand what you're actually agreeing to before you sign anything.
What you can do.
A standard non compete with clear limits
A reasonable buyer will propose a specific radius in miles and a specific number of years. Three to five years and 10 to 15 miles is common in Massachusetts and Connecticut. You know what you're agreeing to and you can plan around it.
A negotiated non compete with carve outs
You can often negotiate terms. If you plan to do mobile work, consulting or teach at a trade school, you can ask for those to be carved out explicitly so they're allowed under the agreement.
A non compete tied to what you're being paid
In many deals the non compete is part of how the purchase price is structured. Part of what the buyer pays you is specifically for the non compete itself. Your lawyer will want to review how that's split.
What to watch for.
- Read every word of the radius and the timeframe. Vague language like 'the surrounding area' or 'a reasonable distance' is an invitation to a future argument. Insist on specific miles.
- Check whether the agreement covers working as an employee, not just as an owner. Some agreements block you from taking a job at any competing shop, not just from opening one.
- Ask your own lawyer to review it before you sign. Non competes in Massachusetts and Connecticut are enforced differently and the specifics matter. This is one of the moments where having your own counsel is worth it.
Owner to owner, and it stays private.
Lotus is straightforward about non competes. When we buy a shop we'll tell you exactly what we're asking for and why, and we'll negotiate in plain language. Talk to James before you agree to anything, and bring your lawyer into the conversation when you're ready.
James StephensonLotus, Massachusetts and Connecticut
Quick answers.
Are non competes enforceable in Massachusetts?
Massachusetts courts do enforce them in business sale situations, though the terms have to be reasonable. The rules are different here than for employment contracts. Talk to your own attorney about what that means for your deal.
Are non competes enforceable in Connecticut?
Connecticut courts also enforce reasonable non competes in the context of a business sale. The specifics of your agreement matter. Your own lawyer is the right person to review it.
What happens if I open a shop after I agreed not to?
The buyer could sue you for breach of contract and ask a court to stop you from operating. That's a serious situation. If you think there's any chance you'll want to work in the trade again, make sure the terms leave you room to do that.
Can I negotiate the non compete after I've agreed in principle to sell?
Yes, but it's easier before you've signed anything. The letter of intent and the purchase agreement are both negotiating points. Once you've signed the final contract it's much harder to change.
What if the buyer asks for a very long timeframe, like 10 years?
That's worth pushing back on. Five years is more common and courts are more comfortable with it. Talk to your lawyer about what a court in your state would likely view as reasonable given your situation.
Thinking about what comes next for your shop or building?
Tell James a little about it. Only James reads it, and the conversation stays private. No pressure, no broker and no mailing list.