My investor wants his dividend. Help!

Dear Aunty B,

I know no one is going to feel sorry for me but here is my situation.

I was talked into selling a slice of my business to an investor who convinced me I was going to run out of money and would need a “war chest” to keep going. What’s happened now is that I gave away 20% for not a lot of money, which I subsequently haven’t needed. Now I am saddled with this shareholder who although he promised to take a long-term view, is actually in a bit of financial strife (he is a property developer) and is putting pressure on me to pay dividends and make a big profit. I am in this for the long-term and want to build a business, so I want to run it at breakeven and reinvest everything in growth!

I think we are heading for trouble.

Fisticuffs in the boardroom

Dear fisticuffs,

You’ve got me all excited. A young, passionate entrepreneur with big ambition! I’ll let you know the next time my husband runs off with his surfboard.

Okay, here is what you must do. You must focus on making a profit. It is okay to make losses or run at breakeven for awhile, but you are at the stage where you need to build a history of success.

That shareholder who has been in for a few years has a right to expect a return on their investment and you should be happy to pay a dividend (no matter how small.) Building a strong “investor” history is going to make your company more attractive in the future for new investors or bank loans. You also need good cashflow to keep you away from the precipice and it sounds like you are running too close for my liking.

What you need to do is address some of his concerns while getting him on board for the journey.

Be smart!

Your Aunty B

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