Become a Selling Shareholder – The Ultimate Investor

Lesson 7 from Lessons From Our Last Nigerian Stock Market Fiasco

The dream of every professional investor is to become the ultimate investor – a selling shareholder. Instead of buying and selling shares, you create the shares and sell them to interested investors or to the investing public through an Initial Public Offer (IPO). To play at this level, you are the founder of the company. You start your business.

The easiest way to do this is to develop your hobby or passion to the level that it begins to make money. The next step is to reinvest your profits as you grow from a one-man backyard operation to a company with an office and employees. As you gradually build a brand, investors will come knocking. You can decide to open the door at this point, or hold on until you create much value, and open the door on your own terms, negotiating from a position of strength.

You can become a selling shareholder by having a friend or family found a company and invites you in the early days to come to invest. You are not an ultimate investor in this instance, as although you may have some measure of control based on your role on the board, you do not have the skills to grow a company from scratch, and eventually sell it.

To found and grow a company, you need all the skills required to set up the company, and systems required to run it, and the ability to recruit and train the right people to run it. This does not happen overnight. Many business start-ups fold up as the founder runs out of steam and burns out. It takes a great deal of doggedness and consistent focus to grow a company that will become an institution, whereby the founder can move on to do other things while the company flourishes under the management put in place by the board.

When you become a selling shareholder, you have a full picture of the state of health of the company and can respond appropriately to stock market share price fluctuations, if your company is listed on the stock exchange. Some companies mop up their shares when prices clash and push them back to the market when sanity returns, making a tidy profit in the process.

For the man on the street that feels that this is way above his head, starting a company is not as mysterious as it seems. All it needs is to identify a need, develop the skills to address that need, decide on a name to call the company, draw down your savings, and start small. Most companies on the planet started with a founder, his passion and ideas, and a little money to set the ball rolling.

Anybody who is willing to pay the price can start a company. You do not need a bank loan to start a company. You can scale down your operations to fit your budget by creative thinking and grow organically (that is, reinvest your profits rather than squander your money on liabilities like fancy cars and posh apartments).

Rather than invest in someone’s dream, why not invest in your dream? Rather than pound the streets looking for a job, why not hire yourself? Founding your company and becoming a selling shareholder is the most rewarding experience you can have as an investor. Even if you decide to retain 100% control, it is always a good feeling knowing that you have grown a company others would willingly love to invest in.