What Are Non Compete Agreements
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Brokers have acted as facilitators for many and varied practice sales. As a result, we have also witnessed the problems that can come up during a transaction, many of which could have been easily avoided with proper planning.
Among the most common issues are those derived from the lack of appropriate non-compete agreements with associates that activate in the practice. If you think you might want to sell your practice, it might be a good idea to bring existing non-compete agreements up to date (or include them in the contracts, if there aren’t any such agreements yet). The agreements should be modified so that DVMs and other essential staff are allowed to agree that their non-compete agreements be transferred.
This is one of the most problematic areas when it comes to selling the practice, as the buyer will most likely raise questions about the current employment contracts and agreements. There had been many occasions when practice sales were cancelled for exactly these types of problems. Common business sense indicates that appropriate non-compete agreements should be in place using clear terms and language.
These agreements should extend for a period of 2 years in veterinary practices, according to Dr. James Wilson, J.D.
The non-compete radius can be set according to the following guidelines:
- urban areas with dense population: 1-2 miles;
- suburban regions: 4-7 miles;
- suburbs that are not in the immediate vicinity of an urban area: 6-12 miles;
- rural areas: 10-25 miles.
Although you might be sure that your employed veterinarians will leave the practice after you sell it, such things are best not left to chance. You should make sure that, at the time you put your practice on the market, the non-compete agreements are in place. Our experience tells us that most buyers will insist on having such agreements with current veterinarian staff in the regions/states that allow them.
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