There are many reasons why business owners decide that it’s time to sell. Whether it’s because they want to embrace their view of retirement, release some capital or they’ve simply ‘had enough’ and are looking for a new challenge. But selling your business isn’t just about a cut-and-dry transaction, says Jonnie Whittle, managing director of Clarion, a boutique wealth planning firm. Here he takes a closer look at the required mindset and process of selling your business.

Building a successful business demands total dedication. The business becomes the owner’s purpose, identity, primary community for relationships and the most meaningful way to spend their time. A sale may result in a financial windfall but it can leave the entrepreneur facing big questions and hard decisions, while also feeling a loss of purpose.

The most successful transitions require the owners to orchestrate finely tuned exits in order to reap the rewards and truly enjoy a lifestyle that is thoroughly deserved.

Taking the time to initiate the planning process early is often neglected, a situation that can greatly affect the choices available and, ultimately, the value of a life’s work. A detailed exit plan is a crucial part of any business sale preparation and the groundwork should be undertaken as early as possible.

Without detailed planning, business owners are often forced to exit on other people’s terms, and a transaction that should de-risk the seller’s position becomes fraught with dangers. Post sale it leaves the seller without clear direction and finding themselves in unfamiliar territory.

Related: Why selling your business is like running an election campaign

Fortunately, business owners do not have to carry out this process on their own. One of the keys to achieving a smooth transition is to engage early with a financial planner, who will examine their business and family circumstances in great detail and help establish their plans for life after the sale.

They ask questions, agree a strategy and ensure the plan is followed, working closely with other professionals to make sure everything runs as smoothly as possible in this potentially stressful period.

Achieving a successful exit involves six key stages.

Identify personal goals

People sell their businesses for many different reasons. Those seeking to exit and capitalise on their success should start by identifying their motivation and begin to plan accordingly.

What will life look like after the sale? Does it have to be a ‘clean break’ on day one or will an earn-out period be acceptable? Will the seller start another business in the future, ‘go plural’ with a handful of non-exec positions, commit to time to charity or head straight for the golf course?

Business owners have heavier responsibilities than most people but also more choices. A sale is not usually forced upon them, so they should only exit if and when it works for them and their families.

Optimise business and personal affairs

Occasionally one hears of a buyer coming out of the blue with an offer that nobody in their right mind would turn down and where contracts of sale are wrapped up in a matter of weeks. More often than not, however, the sale process is a lengthy one: a prospective seller should allow at least two years from the point at which their business is first actively marketed and, realistically, even longer.

It is during this early planning stage that they should make sure they are in the best possible tax position. This could, for example, include transferring shares to their spouse in order to maximise Entrepreneurs’ Relief from Capital Gains Tax.

Most business owners’ affairs are complex and eligibility for some tax allowances is not immediate so the longer their advisers can be given to optimise their position the better.

On the business front, all outstanding contentious issues, contract disputes and litigation should be dealt with. ‘Gentlemen’s agreements’ should be replaced with watertight contractual obligations.

Identify the best assets

Every business has different facets that will be uniquely attractive to buyers. It may have a strong brand, experienced management team, solid repeat customer base, forward contracts and/or favourable leases. All businesses also own intellectual property – this should be identified and, wherever possible, protected.

Intangible assets (goodwill) can considerably increase the value of a business and should be documented thoroughly. Specialist lawyers and accountants can help at this stage.

Make the right impression

Image may not be everything but it counts for a lot. A business that is being offered for sale needs to look its best, both financially and non-financially.

The owner should take a hard look at the company’s external image, looking objectively at its website, head office, facilities, marketing and publicity materials. Does the outward appearance match the company’s inner strengths?

Unless the company has amazing yet under-exploited intellectual property, its financial track record will be pivotal to the price it achieves. The accounts provided to potential buyers should not usually be identical to those supplied to the Inland Revenue – a corporate finance specialist will be able to prepare adjusted valuation accounts that take out one-off items and cut through the noise to provide a more accurate picture of the potential value of a business to a purchaser.

Cast the net

Consider who would have the most to gain from acquiring the business, and why. The owner should be prepared to widen their list of potential buyers and engage a corporate finance specialist with a strong track record in their sector who can market their company to buyers they might never have thought of.

The best bid might not come from the most obvious trade sale. The business might have a geographical footprint that offers access to attractive new markets for a foreign buyer. Perhaps the company’s skills, products or services would complement a potential buyer’s current offering in a different field. Or the business may have characteristics that would make a private equity house want to back a management buy-out or buy-in. There is no point limiting the market of potential buyers.

The sale

During the period leading up to an initial offer being agreed, the seller’s team control the information available to a potential buyer. Once ‘heads of terms’ have been signed, however, the boot is on the other foot and the purchaser’s due diligence team will start picking their way through the company’s deepest secrets.

This is the most dangerous period, when the price is chipped away and guarantees are demanded. It pays, therefore, to keep the interval between signing heads of terms and completing the deal as brief as possible.

There are two main ways to achieve this. The first is to ensure that the company’s house is in order and there is nothing untoward for the buyer’s due diligence team to unearth.

The other is to have another buyer or two in reserve, to keep the competitive pressure on. It is, anyway, sensible to have an ‘insurance’ offer in case the most favoured buyer pulls out for reasons beyond the seller’s control.

Life after the sale

Without a clear financial and lifelong cashflow plan, the period after a sale can be difficult and uncertain. Many business owners wait until this point before consulting a financial planner and embarking on the process of working out what they want to do with the rest of their lives and whether they can afford it.

Financial planners can help at this stage, especially if they provide access to a specialist cash management service which will provide secure breathing space before any decisions are made.

Contrast this scenario, however, with a business owner who has been working toward this moment for years with the support of an expert financial planner. In this situation, the seller already has a clear picture of the future and the confidence that comes from having a detailed plan to achieve a whole new set of goals. Completing the deal marks, in this case, not an uncertain ending but a purposeful, exciting beginning.

Jonnie Whittle is the managing director of Clarion, a boutique wealth management firm that specialises in developing and implementing bespoke long-term plans for individuals, families, and business owners intending to exit or capitalise their business.