In business, you may be faced with dozens of decisions every day, yet it is likely that all the decisions you make in the course of a year combined are less important than the decision on selling your company.

The perfect time to sell is usually when the profit cycle approaches its peak. So again, it is best to plan your intended sale well ahead.

Probably the very first step to achieve what you want from the sale of your business is to appoint a seasoned advisor - a corporate finance specialist.

Never appoint anyone to act on the sale of your business who charges on a time basis. It is in their interest to procrastinate.

With only a little foresight you can change some of the things that you do within your business, and thereby enhance its value.

The quickest way to improve profitability is to stop any “private” expenditure. It is possible to explain all these things to a prospective purchaser, but then they will have to be itemised and agreed upon.

You should pay yourself as if you were an employee, at a rate commensurate with your position. This does not mean you have to lower your standard of living - you can simply switch to paying monthly dividends.

The tax differential between salary and dividends is now fairly minimal, but this will boost the reported profits of your company.

Don’t take advantage of any of the reduced reporting requirements. Include a Chairman’s Statement - expand the definition of Principal Activity in the Directors’ Report - boast about what you have achieved and where the company is going.

Assets should be revalued to reflect their enhanced value. Sell any redundant assets.

The accounting policies should be reviewed to report maximum profits. This is often the opposite of what a family company tries to achieve to mitigate tax.

You should also remove any dead wood including poorly performing staff. Give staff proper titles for the jobs they are doing. Have meetings and decisions minuted. This shows that there is management, structure and control in the business.

There are no rules to tell you what your business is worth. There is no such thing as a “correct” price.

There are in fact a number of different indicators used by the investment community for the purposes of valuation, as further referred to below, but remember that the purchaser is likely to have his own approach to valuing your business which will take into account his own preferences rather than any objective measure of valuation.

At the end of the day it all boils down to a question of earnings, and the purchaser’s required rate of return on capital invested in your business - and, of course, the premium he is prepared to pay for the privilege.

The major comfort factor for any purchaser will be the quality of future financial projections of the business and the robustness of the assumptions used to make the projections.

For most trading businesses, the effective capital gains tax rate on their sale after two years of ownership will be a maximum of 10 per cent.

This is an amount that most sellers of businesses are happy to pay. Unfortunately, the Inland Revenue are not happy to receive it and have introduced many hurdles and pre-requisites in order to increase the amount of tax payable. Hence we have a complex tax.

Undoubtedly the biggest “elephant trap” to be aware of is having a surplus of non-business assets within your business.

Non-business assets could be investment property, stocks and shares or it could be cash. Too much of any of these may increase the rate of tax payable.

Fortunately the Revenue has given a little guidance and stated that 20 per cent is the threshold below which non-business assets would normally be ignored.

Unfortunately, it is as vague as 20 per cent of what? - assets, net assets, turnover, profits, directors time.

There is another trap you need to be wary of. Since the Finance Act 2003, any earn-out where the shareholder remains working in the business will be taxed as income (at 41 per cent) rather than as a capital gain with the 10 per cent maximum referred to above.

Gary Morley is a chartered accountant and currently a director of WJB Chiltern Corporate Finance Limited and partner in MRI Moores Rowland LLP.