A study by the Small Business Service suggests that a lack of forward planning is to blame for the difficulty entrepreneurs’ face when looking to sell on their business.

Effective transition of business ownership can ensure successful continuation of enterprise long into the future and can increase business assets.

However, despite tax breaks introduced by Chancellor Gordon Brown, including 100 per cent property relief for inheritance tax purposes and a 10 per cent rate of capital gains tax on assets held for more than three years, owners are still daunted by the prospect of selling on.

However, although owners cite red tape regulation as a factor affecting their decision to sell, the SBS believes it is a lack of advice and consultation that is to blame for so many businesses ending prematurely.

A spokeswoman for the SBS said, “The tax system is not seen as the problem, it is not knowing where to start. Many people are too busy running their business and planning so far ahead takes up time they have not got.

“Another thing is that many people do not necessarily think their business would be interesting to other people so ride it out until retirement, then leave without thinking about selling on.”

The government believes that when business are not successfully transferred, jobs and skills are lost.

The SBS has asked the Government to examine the barriers that might constrain business transfer. Martin Wyn Griffith, Chief Executive of the Small Business Service, will head a review of the hurdles that many businesses face when ownership changes.

The review is set to concentrate on small firms that provide the sole or main income of the owner and will cover all sizes, types and stages of business from sole traders to AIM quoted small businesses.

In addition, the SBS is asking small business owners for their imput through a survey that will cover topics such as whether business transfer is a feasible alternative to starting up and the effects it has on employees.

What is encouraging is that research indicates that a growing number of people are becoming serial entrepreneurs and sell up at an early age or sell to pick up a young business in order to develop it.

Such approaches bode well for the future of business transfer, as fewer firms will have to close if snapped up by successful business developers.

To take part in the SBS Business Transfer Survey visit www.sbs.gov.uk