Core Elements of an Effective IR Plan
For public healthcare companies and those on the road to an initial public offering (IPO), crafting an effective investor relations (IR) program is essential, and can significantly enhance the investment appeal of your company. Whether your company’s investor relations efforts are new – say, the result of going public – or just in need of a fresh perspective (let’s call it a “reset”), it’s important to keep in mind a few core elements as you plan.
Build credibility with the financial community
Credibility with the Street — both on the buy and sell side — is critical to any successful IR strategy. Start by making your story easy to understand, and keep your message consistent. Never forget that you are “telling” a story, not “selling” it. Though you want to share your story with passion and enthusiasm, investors will quickly get turned off and stop listening if they believe you are over-promising. Avoid being overly promotional, and when planning your conference schedule for the year, be selective about how often you meet with shareholders. The key is quality, not quantity.
When it comes to credibility, transparency is key. Put in place a comprehensive disclosure policy and a clear strategy for providing complete and timely disclosure. Who will be the spokespeople in your company for making such disclosures, and how will this information be communicated? It’s especially important to remain transparent and responsive when problems arise. While it might be tempting to circle the wagons and keep bad news from “getting out,” that’s exactly the wrong strategy to take. It’s crucial to stay visible during bad times, too. Rather than blaming external factors, step up and take responsibility if the problem is your fault — then state clearly how you plan to remedy the situation.
By earning credibility when times are good, your team will get the benefit of the doubt from investors when things are not going according to plan.
Hone your messaging
In order to put your company’s strengths in context, you need to first understand the broader landscape of your industry and existing markets. Once that foundation is established you can focus on the unique strengths that differentiate your company from the competition. When developing your message, don’t fall into the trap of trying to detail every aspect of your business. Instead, provide a succinct and compelling investment summary that distills your message into a manageable set of bullet points — and could fit on a single page in a PowerPoint presentation. Ask yourself these questions: why is your primary market compelling? What is your company doing differently to address this market? What is your growth strategy?
Give investors a firm handle on your company’s business model by concisely explaining your goals and your strategy for reaching those goals. Investors want to see data, but think carefully about what you choose to highlight, since statistics and data — especially in healthcare and life sciences — can have a dramatic effect on a stock’s value. Hone in on a few key metrics that are good benchmarks for how well your company is progressing, and report those metrics on a predictable schedule (e.g., quarterly).
Consistency in your messaging is crucial, so make sure all of your spokespeople tell the same story. Develop several core points within your IR presentation, and hit these points again and again in all of your communication vehicles: in press releases, investor presentations, on your website, and in Q&As with investors. By being proactive and utilizing a wide variety of forums for communication, you’ll give investors a solid sense of your company and what makes it unique.
Target a relevant, engaged, and informed set of shareholders
It’s important to fully understand your shareholder base. Until you have a firm handle on their decision-making process, it will be difficult to ascertain what it is they expect from you. One way to garner this information is by conducting a perception audit — a useful tool for measuring how your target audience perceives your company, your existing product line, and your position within the market. Perception audits can be conducted through in-person or phone interviews. And by analyzing the results, you’ll get a clearer picture of investor expectations, which can help you fine-tune your messaging and even your products.
Once you have a strong shareholder base, don’t take your shareholders for granted. Develop a plan to maintain relationships through a strategically planned program of conferences, non-deal road shows, fireside chats, and one-on-one meetings. These presentations offer an opportunity to share key milestones and build excitement — and collect feedback. They can also put you in touch with new clients and help diversify your shareholder base.
At its core, IR is about building relationships. While most companies know the importance of courting and nurturing both sell-side and buy-side research analyst relationships, few realize they should also establish relationships with key salespeople at leading investment banking firms. Institutional salespeople often have a 20- to 30-year relationship with the buy-side and can be a powerful advocate on your behalf.
Find the right partner
If you don’t have the in-house expertise to develop a solid IR plan, or if you’d just like the benefit of a fresh outside perspective, consider hiring an IR consulting firm — which can help provide the judgment, industry knowledge, investment community relationships, and capital markets expertise that you need to succeed.
Keep in mind that IR consulting firms vary widely. Some put too much emphasis on public relations, allowing investor relations to languish on the backburner. Others are strong on tactics (scheduling meetings, writing press releases) but weak on strategy. Do your homework to make sure the firm you hire has proven knowledge of your industry and its key investors, as well as a strong track record — across the board — on Wall Street.
The relationship you build with investors and with Wall Street is a crucial part of your business strategy — so the investment you make (in time, thought, and resources) in developing a strong IR plan should pay off handsomely in the long run. For more information, download Westwicke’s Investor Relations Guide.
Peter Vozzo is a Managing Director on Westwicke's life sciences, healthcare services, and healthcare technology teams. He has extensive experience in investor relations. He has a BS in chemistry and an MBA in finance/accounting, both from the University of Connecticut.
Tags: investor relations, IR strategy
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