Sooner or later the owners of most businesses want to retire - the alternative, which is dying in the saddle, is not that popular! And despite the despair of their parents, it is quite common for sons or daughters not to have any interest in running the business that has fed and clothed them from birth. Experience shows that it would be wrong to try to cajole family members into taking on the responsibility of running a business if they do not want to.

So how do owner-managers maximise the return on the business they own and settle down to a well-earned retirement? The good news is that the maximum rate of tax on the profit from the sale of a business is unlikely to exceed 10% - an extremely benign rate of tax. Any property used by the business that is sold at the time of the overall disposal will also attract the 10% rate on any/to that profit as well. Also, this tax is payable at the end of January in the year following the tax year in which the business was sold. In plain terms, this means that if a business is sold in mid-April 2005 the tax is due on 31 January 2007. So don’t sell a business in March 2005 - that one month earlier will mean the tax is payable one year earlier!

Once you have taken the decision to sell, the first thing to do is to market the business. This could be done through business contacts you already have or by advertising in trade magazines. The prospect of selling to a local competitor could make financial sense for both sides – even if it’s only for them to remove a direct competitor. You could also try selling on websites such as www.daltonsbusiness.com and www.christie.com. If you are hesitant about making public the sale of your business you could get your accountant and solicitor to vet enquiries on your behalf. Alternatively you could use a PO Box Number.

You will need to produce a small pack of information, which should include the following:

• Brief history of the business
• Your brief history
• Terms of business you get from your suppliers
• Terms of business you give to your customers
• List of staff with ages and length of service (possibly with salaries)
• Full details of the premises
• Any unique sales points of your business
• Latest set of accounts
• Details of items in the accounts that relate to you or your family.

You may ask potential recipients of the above information to sign a confidentiality undertaking.

The problem arises if all your marketing efforts come to nothing. What do you do then?

If you have some able lieutenants in the business who you believe could run the business without you, you may be able to structure a deal that’s acceptable to both sides. Any assets in the business - such as stock, debtors, equipment, premises - may be used by your team as collateral to borrow money against in order to pay you part of the sale price. If the premises are freehold (or long leasehold) you could extract them from the business and rent them back – this has two advantages: it lowers the price of the deal to your guys and gives you an ongoing rental income in your retirement.

If your business has a number of trade customers, they could be used to raise funds via confidential invoice discounting. There are a number of lenders who are happy to put together a deal to raise funds using all the assets of a business.

If this, together with any funds your team can produce from personal sources such as friends and family (or borrowing some money against the value of their houses), is not sufficient to raise the money you need, you could lend it to them! The term “Vendor Finance” is well known in the corporate finance world. Basically, no money actually changes hands – instead you get a promise of more money in the future – this can be a fixed amount on a fixed date or a variable amount depending on, say, the future profits or turnover of the business. In addition you could receive interest on this “loan”. A variation on this theme is that you sell the business for a share of future profits.

If you are considering going down this route there is one overriding imperative. It is what venture capitalists call “hurt money”. You want your team to be totally committed to the business in which you still have a lot of money invested. You don’t want them walking away at the first hint of a problem and getting a job elsewhere as that’s easy for them to do. What you need to know is that it will hurt them to walk away, and while there is the carrot of them owning a business for little initial outlay, there must also be the stick of losing some money they have invested in the business. Do not consider vendor finance unless each of the new owners has put their hand in their pocket. It does not need to be a lot of money in itself, but it does need to be a lot of money to the individual concerned. This hurt money demonstrates their commitment.

Clearly, the vendor finance part of any deal has great risks and is not for the fainthearted. You would probably consider it only if you had confidence in your buyer and no better deal was available. You would also have to have the safeguard that any default payments to you would result in the business reverting back into your ownership. You might not want the business back – after all you are suppose to be retired - but it would give you the option and some control over yours and your family’s financial security.

If you don’t have people already in the business that are up to owning and running the business independently, then you could try to recruit such a person with the intention of them eventually owning the business.

Gary Morley is a chartered accountant and a director of Chiltern Corporate Finance

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