In many service and sales-driven businesses, a small number of individuals drive a disproportionate share of revenue.
They control the customer relationships.
They originate the deals.
They often “are” the business in the eyes of the client.
But in far too many companies, those key revenue producers have never signed enforceable non-compete or non-solicitation agreements.
That’s not just an HR oversight. It’s a valuation issue.
From a buyer’s perspective, concentrated revenue in the hands of legally unrestrained individuals creates material risk. If two or three people control 30–60+% of revenue and are free to walk — and potentially compete — the buyer isn’t acquiring durable enterprise value. They’re buying relationship fragility.
Owners often discover this during diligence.
The buyer asks:
– Are key producers subject to enforceable non-competes?
– Are they precluded from soliciting customers and employees?
– Are confidentiality protections in place?
And the answers can meaningfully affect price and structure.
Even more complicated: enforceability depends heavily on state law. In California, employee non-competes are generally unenforceable outside of a sale-of-business context. Other states — including Minnesota and increasingly Illinois — have tightened restrictions or imposed compensation thresholds and notice requirements. What appears protective on paper may not survive legal scrutiny.
Can this be fixed during a transaction? Technically, yes. Practically, it’s expensive.
If you approach key salespeople before going to market, they may require cash bonuses, retention payments, equity, or guaranteed compensation in exchange for new employment restrictions. In many jurisdictions, continued employment alone is not deemed sufficient consideration in exchange for an employee’s consent to non-compete/non-solicit terms.
If you wait until a deal is underway, leverage shifts. The employees know there is a transaction. Buyers often require new agreements at closing — and the cost of securing them frequently comes out of the seller’s proceeds.
But even a signed non-compete does not solve the deeper issue.
The real solution is structural — and it takes years to truly implement well. Institutionalizing customer relationships, diversifying account coverage, cross-selling across teams, embedding CRM discipline, and reducing relationship dependency cannot be rushed in a 60-day pre-sale sprint.
Enterprise value is built over time.
And in an exit, leverage belongs to the party that controls the risk.
Too often, it isn’t the owner.