How do I handle my demanding investor?

Dear Aunty B,

My relationship with my investor has gone bad. From the start I wanted to grow slowly but he insisted on putting money into the business after I met him at an industry function.

Two years down the track and he is on my back daily demanding we grow faster, take in more money and that we take money out of the business. We on the other hand want to build a sustainable business, expand from our cashflow so we are not diluted and leave cash in the business as growth capital.

This guy has been a very helpful mentor. But it is increasingly obvious that we view the future differently as he is obsessed with our eventual company exit, when we feel like we are just starting up!

How do I control this investor who has a 15% stake in the company?

Doug
Perth

Dear Doug,

You don’t bother. You buy him out as quickly as you can. One of the most important planks of a successful business is the alignment of shareholder goals. This is particularly important at the start of the shareholder relationship. As I say until I am blue in the face, you cannot spend enough time getting to know your future business partners. It is a marriage of sorts, where you all must share the same values, goals and beliefs. In those preliminary talks you need to not just listen to what they are saying but explore their attitudes and their past. If an investor says he loves building businesses and then talks non-stop about exits, that is a big clue there might be trouble down the track. But even if everything seems aligned at the start, people change.

Three years down the track a wealthy shareholder might get into financial trouble and start asking for more money from the business. A young business partner might start a family and suddenly want high dividends. Stuff happens and you need to be prepared for that.

So come to terms with the fact that your investor has outlived his usefulness and get him out.

Be smart,
Your Aunty B

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