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How to Negotiate a Noncompete Agreement

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This story appears in the February 2012 issue of Entrepreneur. Subscribe »

Fair TradeEntrepreneurs with one-track minds like Steven Smith don't want to hop between industries--they want to stay where their passions lie. But if you're looking to sell one business only to start a similar one, you may run into trouble. Most buyers will want you to sign a noncompete agreement dictating that you won't operate in the same or similar business for a certain period of time within a specific geographic area. Noncompetes may also come into play when employees leave a company to work for a competitor.

But signing a noncompete doesn't mean you have to start from scratch or leave your field of interest; you can negotiate terms that don't restrict you entirely. "Both sides have an interest in making it reasonable," says Thomas Brown of Kansas City, Mo.-based Brown Law Firm and author of How to Start a Business & Not Get Sued. "You have to bear in mind what it is you really want, and bear in mind what the other really needs. And that's where you negotiate." Here are a few ways sellers can carve out some wiggle room.

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