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Non-Compete Value Calculator

Estimate the financial value of a non-compete agreement based on revenue at risk, enforcement probability, and duration.

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What Is a Non-Compete Value Calculator?

A non-compete value calculator estimates the economic worth of a non-compete agreement by quantifying the revenue that would be at risk if a key person -- an employee, partner, or acquisition target's founder -- were to compete directly with the business. It applies a probability factor (likelihood that the person would actually compete and succeed in diverting revenue) and calculates the value over the non-compete's duration. Non-compete agreements appear in employment contracts, partnership buyouts, M&A transactions, and franchise agreements. Their value is often the most contentious negotiation point in these deals because both sides have legitimate but opposing interests. The employer/buyer sees the non-compete as essential protection for customer relationships, trade secrets, and goodwill. The employee/seller sees it as a constraint on their earning potential that should command premium compensation. Enforceability varies dramatically by state. California, North Dakota, Oklahoma, and Minnesota effectively ban non-competes for employees. The FTC's 2024 proposed rule (currently stayed by judicial injunction) would ban most non-competes nationwide. Other states enforce them if the scope (geography, duration, and activity restrictions) is reasonable. A non-compete that is unenforceable has zero practical value regardless of what the calculator shows.

How to Use This Calculator

Estimate Revenue at Risk

Calculate the annual revenue that the person could divert to a competing business. This includes direct customer relationships they control, accounts they manage, and revenue tied to their personal expertise or reputation. For salespeople, it is typically their book of business; for executives, it may be a percentage of total company revenue.

Assess Competition Probability

Estimate the likelihood that the person would actually start or join a competitor and successfully divert revenue. Consider: their financial resources, entrepreneurial history, non-compete enforceability in your state, and customer switching costs. Most scenarios warrant 20-50% probability.

Set the Duration

Enter the non-compete term. Courts most commonly enforce 1-2 year non-competes. Agreements over 3 years are rarely enforced in full. Use the enforceable period, not the contractual period, if you are in a state with judicial modification.

Key Concepts

Reasonableness Standard

Courts evaluate non-competes using a reasonableness test that balances the employer's legitimate interests against the employee's right to earn a living. Factors include duration (1-2 years is generally reasonable), geographic scope (must match the employer's actual market), and activity restrictions (must be narrow enough to allow the person to work in their field).

Blue Pencil Doctrine

In some states, courts can modify an overbroad non-compete to make it enforceable rather than voiding it entirely. For example, a court might reduce a 5-year, nationwide ban to a 2-year restriction within 50 miles. Not all states allow blue penciling -- some void the entire clause if any part is unreasonable.

Garden Leave

A period during which a departing employee is still paid by the former employer but prohibited from working. Garden leave provisions are more enforceable than unpaid non-competes because the employee is compensated for the restriction. Common in the UK; gaining traction in U.S. employment agreements.

Non-Solicitation vs. Non-Compete

A non-solicitation agreement prohibits contacting specific customers or employees but allows the person to work for a competitor. Non-solicitation agreements are more narrowly tailored and more consistently enforced than broad non-competes.

Expert Insights

Non-Solicitation Is Often Sufficient: A well-drafted non-solicitation agreement protects the specific customer relationships you care about without the enforceability risks of a broad non-compete. Courts enforce non-solicitation agreements far more consistently because they restrict specific conduct (contacting known customers) rather than an entire occupation.

Pay for What You Get: In many states, a non-compete signed after employment begins requires independent consideration -- a signing bonus, raise, or continued employment (varies by state). Tacking a non-compete onto an existing job with no new compensation is unenforceable in Illinois, Massachusetts, Washington, Oregon, and several other states. Budget 10-25% of the protected revenue value as reasonable consideration.

Enforceability Is the Multiplier: A non-compete worth $500,000 in protected revenue is worth zero if it is unenforceable. Before relying on a non-compete, get a state-specific enforceability opinion from employment counsel. The $2,000-$5,000 legal fee is trivial compared to the false sense of security from an unenforceable agreement.

Frequently Asked Questions

It depends entirely on the state. California, North Dakota, Oklahoma, and Minnesota effectively ban employee non-competes. Most other states enforce them if the scope is reasonable in duration (1-2 years), geography, and activity restrictions. The FTC proposed a nationwide ban in 2024, but it is currently stayed by judicial injunction and its future is uncertain.

Overbroad scope (e.g., worldwide restrictions for a local business), excessive duration (over 2-3 years), no legitimate business interest to protect, lack of consideration (no compensation for signing), and applying to low-wage or non-managerial employees. Courts look at the totality of circumstances.

In M&A and partnership buyouts, the non-compete portion is typically valued at 10-30% of the total purchase price. A portion of the buyout price is allocated to the non-compete for tax purposes -- the seller pays ordinary income tax on the non-compete portion (not capital gains), and the buyer amortizes it over the non-compete period (typically 15 years for tax purposes under IRC Section 197).

Courts are skeptical of non-competes for independent contractors because the employer has less control over their work and the relationship is inherently temporary. Non-competes against contractors are enforceable in some states if they are narrowly tailored and the contractor had genuine bargaining power. Non-solicitation agreements are a more reliable alternative.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.