Bill and Carol started their business in Coventry in 1975. In the beginning it was run from Bill's garage where he made spare parts for washing machines. Carol looked after the accounting side of the business.

Three children and 25 years later, they had expanded to general manufacture of “white goods” components, employed 30 people and were paying off the commercial premises from which the business now operated. Their daughter was employed in the sales department, but their two sons were not in the business. Their savings were modest, as they always believed that their business was their ultimate pension plan.

The business had its ups and downs, but Bill and Carol made a good living from it. They were happy that they still managed the business together and confident that they could sell it for a large capital sum for their retirement.

They had been conscientious, if slightly unsophisticated managers. They had brought in consultants from time to time to advise them on their business planning but, usually, after a little while, the process was forgotten and the business plan gathered dust.

In most years the business published a modest profit, but Bill and Carol lived well out of it. In 1999, Bill and Carol decided the time had come to sell. The were both in their late 50's and were very tired of the long hours and pressures involved in being small business owners. Their two sons were not interested in the business and their daughter was soon to start a family and did not want to take on any further responsibilities.

To them a disposal of the business would entail a trade sale, probably to a competitor within the same industry. They had never considered any other method of disposal, such as selling to their managers or employees, and had not groomed anyone within the business who could take it over. They hoped that the sale of the business would realize enough to pay off the mortgage on their commercial property, leave them enough to give something to each of their children and retire in comfort.

“Although the accounts do not show it,” said Carol “this is a very profitable business. We would not sell it for less than £1 million.”

The business was put up for sale with a company broker, who expressed doubts at the asking price, but advertised it at that price nevertheless. Two long years later the business was sold for £150,000: stock at £100,000 and goodwill of £50,000. Bill and Carol could not clear the mortgage, so they sold their commercial property for far less than they had hoped. They did not have enough to give the children their gifts and, although they had sufficient capital to retire, their retirement was not going to be as luxurious as they had planned.

Does this sound familiar? Can we blame their problems on the downturn in manufacturing, or bad luck, or is there a more obvious and fundamental reason for the dashing of Bill and Carol's dreams?

The real reason is that Bill and Carol never planned for the day they would have to dispose of their business. They never took the necessary steps to decide how to dispose of it, or how to remove those things that depressed the business's value, or to improve the business's appeal to potential purchasers.

These were some of the things that were wrong with their business at the time of sale:

• There was no middle management in the business, so when Bill and Carol left they took all the inside knowledge of the business (including the crucial customer contact) with them and, consequently, limited the potential buyers to owner-managers like themselves to the exclusion of pure investors.
• Their accounts had always been prepared to depress profits and taxation, and the potential purchasers could not be convinced that it was more profitable than the books indicated it to be.
• In the two years it took to sell the business Bill and Carol lost enthusiasm for their work, the business lost direction and took on a tired, depressed look. More importantly, profits also slipped.
• The timing was not right to sell the commercial property, but they had to sell and, consequently, did not get the best price.
• They had no time to persuade their children of the benefits of taking over the business and, even if they had persuaded them, there was no time to groom them for ownership.
• They had not spent enough time on their own financial planning, or considered it in an integrated way in conjunction with their disposal plans.