Top Tips for Selling Your Business: Maximising Value and Planning for the Future

Written by Jonathan Dowling, Chartered Financial Planner, Pareto Financial Planning, a FT Top 100 Financial Adviser firm

Selling a business is a significant financial and emotional milestone. Whether you’re a founder looking to retire or an entrepreneur planning your next venture, careful financial planning before and after the sale is crucial. By considering tax efficiency, protecting business assets, and planning for the future, you can ensure a smooth transition while maximising the value of your hard-earned success.

Here are Pareto’s top tips for selling your business.

Pre-Sale Planning: Preparing for a Profitable and Efficient Exit

The best time to start planning for your business sale is years in advance. Proper preparation can help you maximise tax reliefs, protect business value, and set up a secure financial future.

1. Extracting Cash Efficiently: Leveraging Pensions

One of the most tax-efficient ways to extract cash from your business before a sale is through pension contributions. Business owners can make significant pension contributions, reducing taxable profits and, ultimately, their Corporation Tax bill. By utilising a pension scheme, you not only secure funds for retirement but also minimise the immediate tax burden before the sale.

2. Understanding Capital Gains Tax (CGT) and Business Asset Disposal Relief

Capital Gains Tax (CGT) is a major consideration when selling a business. From April 2025 Business Asset Disposal Relief (previously Entrepreneurs’ Relief) allows eligible business owners to reduce CGT to 14% on qualifying business gains up to £1 million (NB. from April 2026 this rises to 18%). Ensuring your sale qualifies for this relief can result in substantial tax savings. Engaging with a financial advisor well in advance can help structure the sale to maximise available reliefs.

3. Ensuring the Business is Fit for Sale: Protection Measures

A potential buyer wants to acquire a well-structured, financially stable business. Reviewing key areas such as financial records, operational processes, and risk management strategies is essential.

• Key Person Insurance: Protects the business in case of the sudden loss of a key employee or director, ensuring continuity.
• Shareholder Protection Insurance: Helps co-owners buy out shares in case of an unexpected event, offering stability to potential buyers.
• Debt and Liability Review: Ensuring liabilities are minimised and agreements are in place to facilitate a clean transition.

Taking these steps will make your business more attractive and valuable to potential buyers.

4. Long-Term Planning: Life After the Sale

Many business owners focus solely on the sale but overlook what happens next. What will you do once you’re no longer running the business? Whether you plan to retire, start a new venture, or invest the proceeds, having a long-term strategy is essential. Considerations include:

• Setting new financial goals aligned with your post-sale lifestyle.
• Creating an investment strategy to manage proceeds wisely.
• Understanding tax implications on wealth management and estate planning.

Post-Sale Planning: Managing the Proceeds Wisely

After the sale, it’s crucial to make informed financial decisions to ensure long-term financial security and wealth preservation.

5. Generating Income vs. Capital Growth

One of the most critical decisions post-sale is how to use the proceeds. Do you need to generate a regular income, or are you aiming for long-term capital growth?

• Income Generation: Options include annuities, dividends from investments, or rental income from property investments.
• Capital Growth: Investing in stocks, bonds, and funds with growth potential can help preserve and grow wealth over time.
  A financial planner can assist in building a balanced portfolio tailored to your risk tolerance and financial goals.

6. Inheritance Tax (IHT) Planning: Reducing Tax Liabilities

Without proper planning, a significant portion of your wealth could be lost to Inheritance Tax (IHT) upon passing. Currently, the IHT threshold is £325,000 per individual (in some circumstances this can raise to £500,000 if passing on a main residence to direct descendants) with a 40% tax applied to amounts above this.

• Gifting Strategies: Transferring wealth to children or grandchildren through tax-efficient gifting.
• Trusts: Using trusts to protect wealth and reduce potential IHT liabilities.
• Business Relief (BR) Investments: From 6th April 2026, investments in qualifying BR schemes may be eligible for 100% relief from Inheritance Tax (IHT) up to £1 million, with a 50% reduction applied to assets exceeding this threshold. However, don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you are unlikely to be protected if something goes wrong.

7. Using Cashflow Modelling to Plan Financially

Cashflow modelling is a powerful tool to visualise how financial decisions impact your future wealth. By working with a financial planner, you can simulate different scenarios, such as:

• The impact of withdrawing funds for retirement.
• Investment returns over different time horizons.
• Tax liabilities and estate planning options.

This helps ensure your financial decisions align with long-term goals.

8. Essential Documents

Ensuring all legal and financial documents are in place protects your wealth and legacy.

• Updating Wills: A valid and up-to-date Will ensures assets are distributed as intended.
• Lasting Power of Attorney (LPA): Assigning trusted individuals to make financial and healthcare decisions if you become unable to do so.
• Reviewing insurance policies: Ensuring adequate coverage for future needs.

Final Thoughts: A Strategic Approach to Selling Your Business

Selling a business is not just a transaction—it’s a transition that requires strategic financial planning. By focusing on both pre-sale optimisation and post-sale financial management, business owners can secure their financial future while minimising tax liabilities. Whether you need to maximise pension contributions, plan for CGT reliefs, or build an investment strategy, seeking professional financial advice early can make all the difference.

With careful planning, the sale of your business can lead to long-term financial security and the freedom to embark on the next exciting chapter of your life.

If you would like advice or want to find out more about selling your business, please contact: hello@paretofp.co.uk or call us on 0161 819 1311.