Small and Medium-sized Enterprise (SME) owners are failing to get the best price when they come to sell the business because they target the wrong buyers, new research suggests.

A survey by Devonshire Corporate Finance (DCF) shows that 51 per cent of business chiefs think that direct competitors are the best people to sell to, when in fact strategic buyers are often a better bet.

Steven Neal, director of DCF, said: "It is the strategic buyer, not a businesses competitor, who pays a premium price for a business.

"The sale of a business is often a once in a lifetime opportunity, so it is essential to get it right and achieve the best price."

Of the 100 businesses questioned for the survey, 92 per cent were aware of the concept of an exit strategy, yet seven in ten did not have one in place.

Potential reasons given by respondents for giving up the businesses included being made an offer they could not refuse and simply that they were approaching retirement age.

Meanwhile, three in 10 said they would do so to spend more time with the family.

Anecdotal evidence suggests that far from being able to retire early, many small business owners actually carry on later than employees.

In a recent survey, most of those who said they thought they would work later in life said they had to, rather than wanted to.

When thinking about moving on, only 52 per cent of respondents to the DCF survey said they would not sell the business to its top executives, despite the fact that 92 per cent thought their managers were doing a good job.

Almost 80 per cent said they did not expect to let a family member take over when they retire and 46 per cent said they planned to keep on working after selling up.