Buying a Trades Business Without Losing Its Best Technicians

The situation

Marek had worked as a licensed plumber for twelve years, most of them for other people's companies. He wanted to own the business rather than keep working for someone who did. Buying an established company appealed to him more than starting from nothing: an existing customer base, a service van already on the road, and revenue from the first day of ownership rather than years of building a client list from scratch. He didn't have enough capital to do it alone, so he brought in Piotr, a friend who worked as a registered nurse and had savings looking for a home. Piotr wouldn't work in the business day to day, but he would put in roughly half the purchase price and take a seat as a co-owner.

The business they found was a residential plumbing and heating service company in Ancaster, built over sixteen years by its owner, Omar, who was ready to retire. The company had a handful of trucks, a modest office, and, most importantly, two senior technicians who had each been with Omar for more than a decade. Between them, those two technicians handled most of the company's recurring maintenance contracts and had personal relationships with a large share of its long-standing residential clients. Omar had priced the business at roughly $1,150,000, reflecting steady, predictable revenue rather than rapid growth. Marek and Piotr came to Treadstone Law with a signed letter of intent and asked for help turning it into a purchase agreement.

What the deal was missing

The letter of intent covered price, a closing date, and a short list of assets and equipment included in the sale. It said nothing about what would happen to Omar's relationship with the business after closing, and nothing about the two technicians beyond a general assumption that they would "stay on." Marek's instinct, reasonably enough, was that the purchase agreement should include a non-compete clause preventing Omar from opening a rival plumbing company down the road, and separate non-compete agreements with the two technicians locking them into staying.

The first half of that instinct was sound and became a real point of negotiation. The second half ran into a legal wall. Ontario's Employment Standards Act, 2000 generally prohibits employers from using non-compete agreements with their employees — clauses that restrict where an employee can work after they leave. The law carries one narrow, relevant exception: it permits a non-compete with an individual who sells a business and, as part of that sale, becomes an employee of the buyer. That exception fit Omar, who was staying on for a transition period as a paid advisor. It did not fit the two technicians. They weren't selling anything; they were ordinary employees, and an employer cannot bind an ordinary employee to a non-compete no matter how central that employee is to the business's value. A signed non-compete with either technician would have been unenforceable on its face, giving Marek and Piotr a false sense of security while doing nothing to actually protect the business if either technician decided to leave for a competitor and take clients with them.

That distinction mattered because the two technicians, not the trucks or the office lease, were most of what Marek and Piotr were actually buying. A plumbing company's goodwill lives substantially in the relationships its technicians have with recurring clients. If either senior technician left in the first year and clients followed them, the business Marek and Piotr had agreed to pay $1,150,000 for could be worth meaningfully less within months of closing, and there would be no covenant standing in the way.

What we did

1. Negotiated a real, enforceable covenant against the seller. Omar wasn't subject to the same restriction as an ordinary employee, so we negotiated a non-competition and non-solicitation clause directly into the purchase agreement, separate from his transition employment. It stopped him from opening or working for a competing plumbing or heating business within a defined radius of Ancaster for three years, and from soliciting the company's clients or employees for the same period. Because it was tied to the sale of his business rather than to an employment relationship, it was the kind of covenant Ontario courts will enforce provided it stays reasonable in geographic scope and duration, which we kept it well within.
2. Explained clearly why the technicians couldn't be locked in the same way. We walked Marek and Piotr through the employee non-compete prohibition and its narrow exception before they signed anything, so the gap in protection was understood going in rather than discovered after closing when a technician gave notice. Believing you have a covenant that a court will not enforce is worse than knowing you don't have one, because it stops you from building a real alternative.
3. Built a retention package instead of a restriction. Non-solicitation clauses aimed at protecting an employer's clients and workforce remain legally available even though non-competes are not, so each technician was offered a new employment agreement at closing that included a non-solicitation clause preventing them from soliciting the company's clients or co-workers if they ever left, paired with a retention bonus of roughly $12,000 paid out in instalments over a twelve-month period they stayed employed. The goal wasn't to trap either technician; it was to make staying clearly worth more than leaving during the period when the business was most vulnerable to disruption.
4. Restructured price around a holdback tied to client retention. Rather than paying Omar the full $1,150,000 at closing, the agreement set a cash payment of roughly $980,000 at closing and held back the remaining $170,000, released to Omar in full twelve months later only if the company's recurring service contracts stayed above a defined retention level. This gave Omar a direct financial stake in a smooth handover — introducing Marek and Piotr properly to long-standing clients, being available to answer questions during the transition period — rather than treating closing day as the end of his involvement.
5. Completed diligence beyond the financials. Alongside reviewing the company's revenue and equipment, we confirmed there were no outstanding liens against the business assets, checked that Omar's corporation had no unresolved tax obligations that could follow the assets into new hands, and reviewed the existing technicians' employment terms to confirm what obligations, if any, would transfer with the purchase.

The outcome

The deal closed on those terms. Both technicians signed the new employment agreements and stayed through the transition; the retention bonus gave them a concrete reason to wait and see how the new ownership worked out rather than testing the market immediately after a change of hands, which is often the moment key trades employees are most likely to leave. Omar stayed on in an advisory capacity for the first few months as agreed, introducing Marek to several long-standing clients directly, and the company's recurring service contracts held steady through the retention period. Twelve months after closing, the retention threshold was met, and the holdback was released to Omar in full.

Neither technician tested the non-solicitation clause, and Omar did not compete against the business he'd sold. More importantly, the business performed the way Marek and Piotr had underwritten it to: the clients stayed because the people they trusted stayed, not because of a piece of paper that would have been unenforceable against them in any event. A year after closing, Marek had added a third technician and Piotr remained a passive investor drawing a return on the business he'd helped fund. The deal worked because the protection was built around what the law actually allowed, rather than around what would have felt reassuring to sign.

What you can learn from this