4 common financial planning mistakes made in business sales and how to avoid them

Selling a business is one of the most significant financial decisions you can make, and it’s also one of the most complex.

Mistakes during a business sale can be costly, both financially and personally, so it’s important to get it right.

Starting early and working with the right team of financial planners, accountants, and solicitors can help ensure that when the time comes to sell, you can do so with confidence.

Read on to discover four common mistakes made in business sales and what you can do to avoid them.

1. Leaving tax planning too late

One of the most common and costly mistakes you can make when selling a company is to leave your tax planning too late.

If you only begin to plan once you’ve found a buyer, you may miss out on various tax-efficient opportunities.

Reliefs such as Business Asset Disposal Relief (BADR) depend on certain conditions being met for a number of years prior to sale. Moreover, you may be able to benefit from your Capital Gains Tax (CGT) annual exempt amount if you spread the sale over a long period of time or transfer some of the assets to your spouse, if you co-own the business.

All of this requires time and careful planning. Starting several years in advance allows you to structure your shareholdings optimally, separate trading and non-trading assets, and ensure you maximise the reliefs the business is eligible for.

It also means you can make decisions in a measured way with foresight, rather than under the pressure of a fast-moving transaction.

This doesn’t mean you need to be able to predict the future for when you may want to sell; rather, it’s about ensuring you have an up-to-date exit plan in place for when the time comes.

A financial planner can work alongside other professionals, such as accountants and solicitors, to help you create an exit plan that makes the most of your tax-efficient allowances.

2. Not aligning the sale with personal financial goals

Another common mistake to avoid when selling a business is focusing solely on the sale price without considering what the proceeds are meant to achieve.

Whether you want to retire, start a new business venture, or support your family, it’s important to know what you want to do with the proceeds and align the sale with your personal plan.

If you don’t do this, you may wait a long time for the highest offer to come along, when in reality, you could achieve everything you have planned and more with an existing offer on the table.

Equally, you may be quick to settle for an early offer that looks impressive but won’t go far enough in supporting you in the next chapter of your life.

The key is to align the sale with your personal financial goals and make sure you have projected the proceeds of an offer into your plan for the years ahead, which you can do with the help of a financial planner. This ensures any decisions you make aren’t rushed or overly influenced by short-term market conditions.

Indeed, it’s easy to fall into the trap of thinking that you should wait for the perfect moment to sell. You might think that this is when the market is strong, tax rules change, or when your personal circumstances (such as your health) demand it.

However, the reality is that markets, buyers, tax rules, and even personal health rarely line up neatly. So, waiting for the perfect time can be costly and may leave you in a weaker negotiating position.

By defining what “enough” looks like in terms of income, wealth, and lifestyle, you can align the sale with family goals and values, creating a solid foundation for your life after the business.

3. Ignoring estate planning

Once you sell your business, your Inheritance Tax (IHT) situation can change significantly. For instance, you may no longer qualify for Business Relief (BR), and the sale could leave you with substantially more liable assets than before.

So, without careful planning, your estate may lead to unexpected tax liabilities, family disputes, or tax investigations.

That’s why it’s important to factor in estate planning both before and after the sale. Reviewing your will, trust arrangements, and gifting strategies can help ensure that the proceeds of the sale are protected and distributed according to your wishes. By thinking about succession alongside the sale, you can help support your legacy and your family’s future.

A financial planner can work with you to ensure your exit strategy is fully integrated with your long-term estate planning goals.

4. Forgetting to factor in risk after the sale

Once you’ve completed the sale, you may be exposed to new risks that demand careful attention.

For example, holding large amounts of cash can leave your wealth vulnerable to inflation, which can gradually erode its real value. Alternatively, investing the proceeds without a clear plan can expose you to market volatility and potential losses.

To overcome this, it’s important to carefully plan your post-sale wealth management. Depending on your goals, this may include:

Making full use of tax-efficient allowances, such as pension contributions and ISAs.
Creating a diversified investment portfolio designed to provide stability, protect capital, and support steady long-term growth.
Exploring other tax-efficient options, such as moving assets into trusts or considering alternative investments like Venture Capital Trusts (VCTs) – though it’s important to get professional advice as these can come with additional risk.

A financial planner can help you create a strategy aligned with your personal goals that ensures the wealth from your sale is secure and continues to work for you long after the transaction is complete.

To speak to a financial planner, get in touch.

Email [email protected] or call us on 01625 466360.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.