Selling Sites & Non-Compete Clauses

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Yesterday a reader who emailed me mentioned that he was surprised to hear about non-compete clauses when selling websites. And I’ve seen people in a few SEO groups echo the same sentiment in recent months.

As someone who’s been flipping sites as a business model for more than 5 years now, it’s almost like I can’t remember a time when I didn’t have a few non-compete clauses hanging over me.

So, if you’re making your first site or you have a couple of sites right now that you’re planning on eventually selling, then you really need to be aware of non-competes and how they may affect you. I’ll share what I know and my experience with them.

Their Purpose

If you’re just now learning about non-competes, then you might be wondering why you have to agree to one of these. But I tend to think that they are a good idea because you can’t rely on everyone to have their moral compass properly tuned.

The reason the brokers require sellers to agree to a non-compete clause in the selling agreement is to protect the buyer and the buyer’s investment.

Would you want to buy a site at a 30x multiple from me if I could start one exactly like it the next day? Targeting all the same keywords as the site I just sold you.

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Or worse, what if I already had a competing site that I didn’t tell you about?

So, I’d get a nice payout and then be able to devote my time (and all that money you just gave me) to growing my site to take all your rankings. Sounds like a shitty scenario, eh?

I don’t think people would be dropping six and seven figures on sites if there was a chance that the seller could become a competitor immediately.

It’s the Wild West out there, and make no mistake, plenty of people are shitty human beings. So, while I think non-competes are designed for the buyer’s protection, they also help sellers because without them we wouldn’t be able to easily sell our sites at such high multiples.

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My Experience

Every single site that I’ve sold with a website broker has put me in a non-compete situation. Exactly zero of the sites that I’ve sold privately (and the few I’ve sold on Flippa) have had non-competes.

Though one person that I sold to privately asked me if I was going to start competing against him. And in case you’re wondering, I’m not into that sort of bullshit because it would be shitty to do someone like that.

Plus, I believe in karma.

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Length of My Non-Competes

I’ve sold a lot of sites and the non-compete periods are not the same for each sale. They even vary by broker.

The shortest non-compete that I’ve ever had was one year in length. And the longest was four years. I’d say that three years has been the average for most of my sales though.

Honestly, I feel like most of the non-compete periods are a bit too long. In my opinion, for most sites the period should max out at two years.

I think two years should be plenty of time for a buyer to really build a fortress around a site before you get back into the niche (assuming you want to). And if that’s not long enough for them, then they really shouldn’t be buying sites.

What It Usually Covers

I’d love to screenshot one of my non-compete clauses for you, but those seller agreements all have non-disclosure clauses as well.

Basically, they say that you can’t create or be part of any sites, software, or anything else online that might compete with the site you’re selling. And it’s specific to the niche.

For example, a few years ago I sold a multi-niche site, so the non-compete listed all the top-level niches like home, sports, gaming, etc.

Last year, when I sold my gaming site the non-compete included software, even though it was just an Amazon affiliate site.

A non-compete also usually states that you can’t use anything like the mailing list or advertising contacts, etc that you had with the site until the period expires.

What You Should Be Aware Of

So, one of the brokers that I’ve sold with in the past sends you a draft of the purchase agreement, which includes the non-compete clause. This means you get to read it, and if everything looks good, then you okay it and they send you the final version to sign.

Or, you ask for changes, approve those, then give them the okay and they send you a final version to sign.

Don’t be like me and assume that the version you gave the okay to is the same version that you’re signing. Read that shit again.

One time I had a non-compete period increase by one year on the version I signed…and I didn’t notice cause I didn’t re-read it before signing.

You’ll also want to pay special attention to the section that specifies the niche or niches that the non-compete covers. This was another fuck up that I made.

Two years ago I sold a site focused on a specific sport…and I didn’t notice that my non-compete also listed sports in general as a restriction.

The worst part of this oversight I made was that I also had a baseball-focused site at the time. That means that I was immediately in violation of my non-compete and I had to sell that site (cause I didn’t want to risk getting sued).

Why You Have To Take Non-Competes Seriously

Like I just mentioned, if you violate your non-compete, then you can be sued over it. You might be thinking, yeah but they have to find out about it first.

Who wants to take that risk?

Plus, if the broker finds out, then you will never be able to sell a site through them again. But how will they know, you think?

Well, first off, if you sell a parenting site through them with a 3-year non-compete and show back up two years later to sell another parenting site, then they will know.

Oh, but I’d use another broker, you cleverly think.

I don’t know about you, but I’m not foolish enough to think that the brokers aren’t on friendly terms with each other. They may share their non-compete lists with each other for all I know.

Again, why risk it?

Plus, why be a shitty person? Seriously.

What Else This Might Mean For You

So, in the past I’ve been a big fan of making multiple sites in the same niche to go after the same keywords. This way, you can dominate the top of page one.

But this also means that if you want to sell one of those sites, then you have to sell all of them.

Don’t want to sell them all? That’s fine. The brokers usually give you the option of de-indexing the competing site you want to keep until the non-compete period ends.

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So, yeah, you gotta sell them all. But here’s the thing, in my experience buyers don’t want a package of sites.

It’s mind-blowing, right?

When I sold my gaming site last year, it was a package deal. The sites ranked #1 and #2 for most of the same keywords and had for years.

But the buyer wasn’t thrilled about the smaller of the two sites being included. I even noticed that he sold it on Flippa a few months later.

This wasn’t the first time I had this experience selling a package of sites in the same niche either.

So, these days I don’t bother with creating multiple sites in the same niche, unless it’s something that I plan on holding for the long term. But if you do, then plan ahead for what you’re doing with it when it’s time to sell one of them.

Hopefully now you won’t be surprised by any of this when you sell a site.

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4 thoughts on “Selling Sites & Non-Compete Clauses”

  1. Most non-compete contracts that brokers or buyers put forward are illegal in most of Europe. Probably in parts of Asia as well. So if you’re buying from outside US, the non-compete is as good as useless.

    In most of Europe you can’t have a non compete without compensating the seller for his lost revenue during the non compete duration, and you need to compensate him proportional to the revenue he was making before. Unless the buyer continues paying the seller monthly for the duration of the non-compete, the contracts gets easily thrown out of court in case of litigation.

    Even in USA, the non-compete contracts are enforced depending on a state-by-state basis and the legislation differs a lot.

    While I think that you shouldn’t compete with the buyer after you sold him a website, unless the non-compete clause/contracts is written by a very good lawyer, and it’s specific to the states/countries that both seller and buyer live in, and it’s extremely detailed and precise, it will not hold up in court.

    The idea that you can’t make a website in a “sports” niche because that’s what’s written in the non-compete contract, that’s a perfect example of a non-enforceable clause. Also, non-compete doesn’t apply to sites you owned before the contract was signed, so if you had a baseball site before the transaction, you were not forced to sell them because you were violating the non compete.

    And I never heard in my life of brokers asking you to deindex your other sites from Google for the duration of the non-compete. What brokers are those? Name and shame them.

    I think you’re way too scared by brokers and non-enforceable clauses in contracts, and you should talk to a good lawyer about the enforceability of non-compete and what their limitations are, because if you’ve really gone through what you posted in the post, you’re being taken for a ride because you don’t know your rights.

    Reply
    • Wow, Nick, that’s some really eye-opening information you shared!

      If I recall correctly, the last site that I sold with EF did ask on the intake form if I had other sites in the niche. Though I think they all ask these days.

      And while I definitely do not want to get sued, I’m more concerned with losing my ability to sell sites with the brokers. So, it may be true that I’ve been taken for ride by some of them in the past, my existing non-competes aren’t really in niches where I want to make sites right now anyways.

      But, the next time I sell a site, I’ll be thinking about this info you shared and possibly seeking an outside opinion. So, thanks for sharing your knowledge! Hopefully others will take note of it as well.

      Reply
  2. Wow. Valuable information here. On one hand, I can understand not wanting the seller to create a copycat site the minute the sale closes, but these kinds of agreements strike me as a bit ridiculous. It seems like it comes from a scarcity mindset when the internet is freaking huge. Crazy.

    Reply
    • Agreed. I wish these clauses were a bit more specific, or maybe flexible. For instance, since the gaming sites I sold didn’t cover Fortnite then I should be able to create a Fortnite site… or a site on any other specific game that I want…but I can’t because “gaming” is forbidden. I guess theoretically I could do that and argue my case (if need be), but like I mentioned before – I don’t want to lose the ability to sell sites through the brokers.

      Reply

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