You may be familiar with the concept of a non-competition agreement. Practices and small businesses of all kinds utilize this legal tool to preserve their market share. If you have never bought or sold a practice, you might not know what the function of this agreement is.
When one party decides to buy a business which is heavily reliant on the client base, that buyer will want to ensure that the seller doesn’t turn around and open a competing business across the street. As you know, your client base is an enormous asset. That is included in a practice’s valuation, and it is a very appealing asset to new buyers. To ensure that the majority of the client base remains intact after the purchase, the buyer will have the seller sign a non-compete agreement.
This type of agreement limits the seller to practicing outside a determined geographic area, and it also specifies whether or not the seller may treat the practice’s existing patients (usually this is not permitted) and for how long these issues can be legally enforced. For example, a non-compete agreement might state that the seller cannot open a practice within 30 miles of the practice being sold, and that dentist may not see patients from the practice being sold for a period of two years. After that time, the seller could conceivably open up shop in the same neighborhood and invite previous patients to the new practice. Of course, details will vary, depending on what is agreed upon by both parties. To read more about non-compete agreements, see the full article.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
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