By Bizna Brand Analyst
When we talk of raking in huge sums from business sales, make-up artist Suzie Wokabi apparently made Sh45 million from the sale of her firm Suzie Beauty to Roto tanks maker Flame Tree.
The NSE listed, Flame Tree Group, which completed buyout of Suzie Beauty early this year, disclosed the value of the deal for the first time in its latest annual report.
The popularity of Suzie Beauty skyrocketed some time last year when Kenyan actress Lupita Nyong’o revealed that she was wearing the brand’s lipstick during an interview on the Queen Latifah show.
45 million is quite a fortune but what should you do as a businessperson if you ever find yourself in Suzie’s shoes? You might not make 45 million from a sale, but anything above 5 million is enough to make you sit down and come up with a strategic plan to ensure you don’t end up misusing the money.
Here are some of the things you should do.
(1).Take a breath, a very long breath. The sale of the business often creates a void that will take time to replace. This transition period can take a year or more before you declare yourself ready for the next challenge. The management of your funds needs to reflect this new plan. It is likely that you have had little time to develop this new plan – both for yourself and for your money.
(2) Recognize your new reality. You are not any wealthier than you were prior to the sale. However, your balance sheet has changed dramatically. If you are working for the new owner, your wealth is no longer lodged at your place of work. It is at the bank! And it is not getting the same 24/7 attention that it received before the sale. You might be tempted to become lazy, so watch out.
(3) Professional cash management. A large proportion of business sellers “park” their funds in cash for three months to a year. For a large amount of money, you should have access to wholesale rates. Ensure that you are dealing with professional with direct access to the money market that can ensure that you are receiving the rates you deserve.
(4) Draw up a new balance sheet. There’s no better time than now for you to take stock. Your affairs are probably more complex than you would like. You need funds to live and you need to understand which funds are best accessed from a tax perspective. A detailed balance sheet will give you an accurate overview and help you identify issues that require immediate attention.
(5).Get organized. Your money may be in several places such as a family trust, a holding company and several family accounts. Many business sellers admit that they are overwhelmed with the paperwork and it is very difficult to “keep score”. You might want to consider hiring a part-time bookkeeper.
(6) Communicate your new reality with key family members. Many business sellers have emphasized the importance of communicating their new reality with key family members. So much has changed and misunderstandings can easily arise. Recognize this possibility so as to avoid the unpleasant consequences. After all, the sale is a positive event.
(7) Get an estimate of the taxes owing and when? You need to obtain an estimate of your tax liability. It may be due over several years and some may be deferred indefinitely. There are many strategies available including insurance and philanthropy. Focusing on these issues may be the best way to increase your net worth in the short term.
(8) Charities. Yes, they know you’ve sold. And they may know the sale price. You have moved up their list and they will now be soliciting you for a large commitment. Again, recognize your new reality and be prepared. Many entrepreneurs find it helpful to have a gatekeeper who will handle these requests.
(9) Develop an approach for loans to family. Sooner than you think, you may be asked for a loan by a family member or friend. They may think that the loan is trivial to you. Sadly, they may feel the same way about repayment. Do you take security? Or document the loan? Will it set a precedent? These are sensitive issues. A simple solution? Buy yourself time by telling them that your money is tied up with your advisors.