Closely Held Businesses Turn to Equity Plans as Noncompete Rules Tighten

After the Noncompete: Equity Plans That Build Your Next Owners

Omaha, United States - November 10, 2026 / The McFarland Group /

By Connor Lacy, Partner, The McFarland Group

Business owners who relied on noncompete agreements to protect their most valuable asset, their people, are rethinking that approach. The McFarland Group (TMG), an Omaha-based advisory firm for owners of closely held businesses, says companies are increasingly turning to well-designed equity compensation to keep and develop key employees.

In 2024 the Federal Trade Commission issued a rule banning most noncompete agreements. A federal court set the rule aside that August. The FTC dropped its appeals in September 2025, and in February 2026 the rule was formally removed from federal regulations. The agency now challenges noncompetes case by case, and a growing number of states have restricted them on their own. The result: owners can no longer count on a signed noncompete to keep top talent from walking out the door, or from taking customers with them.

"For years, many owners treated the noncompete as their retention strategy," said Connor Lacy of The McFarland Group. "But a noncompete only tells an employee what they can't do. A well-built equity plan gives them a reason to stay."

From restriction to reward

TMG is seeing clients redesign incentive plans to do the work noncompetes once did. Common approaches include:

• Longer vesting schedules that reward employees for staying through key growth periods or an eventual ownership transition.
• Deferred payouts tied to company value, so the largest rewards go to the people who help build it.
• Clawback, nonsolicitation, and confidentiality terms paired with equity awards to protect customer relationships and confidential information.
• Performance-based vesting tied to measurable value drivers such as EBITDA growth and margin.

"The owners getting this right are using equity to build a management team that thinks like owners," Lacy said. "In many cases, that team can eventually become the buyer."

What owners should do now

TMG recommends that business owners review existing employment agreements and incentive plans with qualified legal counsel, identify the employees whose departure would most affect company value, and consider whether their current compensation gives those people a meaningful stake in the company's future.

"Regulation will keep changing," Lacy said. "A retention strategy built on shared value holds up whatever happens in Washington or the statehouse."

Lacy writes more about the four plan designs, and the team that can become the buyer, at themcfarlandgroup.com/blog/noncompetes-equity-plans-next-owners.

About The McFarland Group

The McFarland Group is an advisory firm based in Omaha, Nebraska, founded by Byron McFarland. The firm has guided over $3 billion in business value through more than 200 ownership transitions over two decades. It works with owners of closely held businesses on M&A advisory, selling a business to management, and performance equity compensation for key leaders. The firm's guiding idea is simple: Go Boldly. Learn more at themcfarlandgroup.com.

Media contact: Alex McFarland · [email protected] · (402) 891-2300 · 4601 Catalyst Court, Suite 3055, Omaha, NE 68106

Contact Information:

The McFarland Group

4601 Catalyst Court, Suite 3055
Omaha, NE 68106
United States

Alex McFarland
+1-402-891-2300
https://www.themcfarlandgroup.com

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