Do I cut dividends or do I cut staff?

Dear Aunty B,

I have a medium business, about $60 million revenue. I am also lucky enough to be supported by great shareholders who have received a steady flow of revenue.

 

For years they have been given a rich stream of dividends and they refer to it as their pocket money.

 

We are in the manufacturing distribution business and have been badly affected by a fall in sales.

 

I am now faced with a very difficult decision. Do I cut dividends to my shareholders or do I cut staff?

 

LD,
Brisbane

 

Dear LD,

Well, our Kev would tell you to cut the dividends to your greedy shareholders. But he doesn’t run a small business, he just runs the country.

 

Look, first of all you need to look at your strategy. Can you run things more productively? Can you trim back staff who are poor performers, or products that are not central to your focus this year?

 

Then recast your figures with those lower costs. Communciate to the shareholders that you are cutting costs, changing strategy, and doing what it takes to ride this out.

 

But let them know that dividends will fall and remind them how good things have been. And make sure you do not cut great staff just because you can’t appease spoiled shareholders.

 

Good luck,

 

Your Aunty B.

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