We'd had a good year in the agency (one I co-founded a few years ago now). The business had grown to be 170 people, with good profits, and my fellow shareholders and I were celebrating at our annual owners' retreat.

Those of us who actively led the business had presented the results, along with plans for investment for growth and building up larger cash reserves for potential threats we perceived on the horizon.

But most people around the table immediately began imagining what they could buy themselves with all that money. Holiday homes, new cars and so on.

It's a common problem: Agency owners often fall into the trap of thinking of the company's money and their money interchangeably. When they need money they look to the business bank account. When there's plenty in the business (and any business that's grown will be talking about sums of money that seem huge), they think of taking more and buying themselves some luxury. But then they wonder why it's difficult to grow the business without cashflow bumps.

This mindset often starts out when the agency is small and some months the founders can't pay themselves — or may even have to lend money in — and other months they can take more.

But at a certain stage (usually beyond about 10 people) this attitude has to change. It becomes wise to start thinking of the business as a stock-market investment rather than as a bank account you can access via a cashpoint.

You are the CEO, a board director — and you are an owner too. But they are all separate roles and it can really help to distinctly think of putting on different hats when you take each role. Imagine being different people, taking the right decisions for that role alone.

As the owner, you're an investor. You want better rates of return than you can get in a bank account, so you're investing the money at some risk over a longer time frame. Like an investment portfolio which has been designed for returns over a five year period, you shouldn't take that money out ad hoc. It damages the returns over the long term.

Investing for the long term can give the business stability. Then, while wearing your director's hat, you can make decisions more confidently about funding growth plans, or taking risks when you know there are cash reserves.

But at the same time, a business with investors shouldn't starve them of returns on their investment. As directors, you should factor these returns into your plans from the very start of planning.

To help with this, a healthy agency should have a dividend policy that sets out:

  • when dividends will be considered (annually, half-yearly etc)
  • the criteria that must be met for dividends to be paid (e.g. once there is at least x months of cash reserves, and other business KPIs are met)
  • how the dividends will be calculated (eg 20% of net profits).

The shareholders meeting each year should include discussing the policy for future years, and what rate of return you want on your investment, balanced with what growth you want in the business. If you want to change the approach, do it with effect from the next period rather than suddenly.

Working in this way sets the culture of stability and sustainability right from the very top, and helps to avoid the rollercoaster ride that defines many client services businesses.

I lost the debate that time, and my business partners voted for big dividends and did get fancy cars and holiday homes.

We later had to trim back growth plans, and ride on with tighter cash reserves than we'd have liked. It made the business less stable.

From then on I have always made a point of the separation of roles, their different responsibilities — and the importance of thinking as investors in the owner role.

This week, how can you adopt the investor mindset more in your owner role?