You already know that selling your dental practice will come with a lot of contracts to sign. Did you know that a non-compete might be among them? Unless your plans involve moving to a different state for retirement, expect the buyer to ask you to sign a restrictive covenant that protects his or her new practice from any potential risk if you end up returning to dentistry, even part-time.
Here’s what you need to know if a non-compete is part of your dental sales agreement.
Basic Components of a Non-Compete
A non-compete is court-enforceable if the provisions are clear and reasonable. For example, you will be prohibited from practicing dentistry within a 20-mile radius of the practice you’re leaving. There are three main areas the non-compete will address:
- Length of time
- Geographic radius
- Public interest
While a typical length of time in a restrictive covenant for employees might be six months, it’s normal in the sale of a dental practice for the non-compete to be one or two years. The geographic radius typically will not extend beyond the practice’s market area. Because this is different is almost every case, consult with your broker before signing anything. And finally, when it comes to public interest, if your practice is in a rural area without many other dentists, it could be against public interest to deny the right of a licensed dentist to practice. The non-compete cannot have a negative impact on public interest.
It’s also normal for the non-compete to include a non-solicitation clause. This would prohibit you from directly reaching out to your old patients once you leave, if you decide to continue practicing dentistry on your own or part-time with another practice.
State laws vary. While you won’t need a judge to certify a non-compete, your broker and dental attorney can help you ensure the agreement you sign is reasonable and fair for both you and the buyer. It might not seem like a big deal if you plan to retire, but many dentists can become bored easily if they don’t have a plan or goals for retirement. And for some, retirement could mean continuing to practice part-time. In this way, you’re helping your old practice succeed by giving the buyer your best assurance that the practice – and your former patients – are theirs. Just don’t agree to something that’s unreasonable.
N/L Transitions can help selling dentists evaluate non-competes and ensure the entire sales agreement is fair and balanced. Contact us with any questions.