5 Ways to Build Credibility with Investors
In investor relations, credibility is everything. When your authority is damaged, everything you tell the Street will be filtered through the jaded minds of professional skeptics who remember your past failure to deliver, or a time they felt misdirected. That’s why it’s vital to maintain a constant focus on sustaining and growing your level of trust with investors.
Here are five must-do’s to building your management team’s credibility:
- Clearly communicate your company’s strategy. The first step to building credibility with the investment community is to develop an investment thesis that is aligned with your company’s short- and long-term business model. Your thesis should reflect your company’s financial and strategic goals. Avoid platitudes and general statements; instead, be more specific, such as breaking down growth between organic and acquisitions, or being clear about capital deployment priorities. The investment community needs to understand the business model your company is following.
- Be candid, forthright, and transparent. Convey a straightforward, clear message that provides a complete — and realistic — understanding of the company’s fundamentals, challenges and objectives. For example, the competitive situation, industry dynamics, and measurements of success are all things that may not be fully elucidated in financial filings, press releases or PowerPoint presentations. Avoid unimportant, irrelevant information.
- Deliver consistent messaging and goals. It’s important that your designated company spokespeople are communicating a consistent message, and that those messages are similar across all communication channels — the management team, IR website, press releases, media relations, social media pages, conference presentations, etc. Limit the number of company spokespeople to ensure a tight message, and be aware of all the outlets that investors and analysts are utilizing to access information.
- Understand your shareholders. Are your investors skewed towards a growth or value investment style? What do they consider the company’s priorities? Why did they buy shares? What might make them sell? Knowing the motives of your largest shareholders can help. A perception audit can help discover investor sentiments and provide a better understanding of investor perceptions. Discovering sentiments and perceptions can help inform your approach to communicating the strategy — what needs clarification, for example.
- Commit to being responsive. There are few things more frustrating to investors than reaching out to the company with a question or a request for information and not getting a timely response. This can become an even bigger problem in times of crisis. Make it a priority to reach out to your largest shareholders on a regular basis. This can be as simple as a follow-up call after the release of quarterly earnings. Consider a general “IR” phone number or email address on the website for accessibility.
Fundamentally, building credibility is about being forthright, transparent, and accessible. It’s about understanding what your investors want, and delivering it consistently. That’s not always easy to do, but do it you must if you want to maintain happy relations with your analysts and investors. A strategic investor relations firm can often be a powerful ally. Feel free to reach out for a conversation about how to build trusting relationships with your investors.
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.
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