business growth

Does Size Matter? Planning a Successful Transition from a Small to Large Business

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Business growth is always a hot topic. And lately, we’ve been having a lot of conversations with clients and potential clients about how to grow. But what really stands out is that the challenges are not so much about growing per se. They’re more about how to grow smart.

You see, when a small business is absolutely killing it, it runs the risk of outgrowing the (super helpful) “small business” designation. Suddenly, the issues are all about translating what is working well at this level to the next level and the translation is almost never one-to-one. And for businesses that work with federal, state, or local government offices there is even more to think about. It’s not unlike learning to play 3-dimensional chess.  

Yes, there are better and worse ways to move from being a big fish in a small pond to being a small fish in a big pond. So, let’s talk about how to do it well.

Mini Case Study

For instance, consider the following typical business growth scenario:

I’m a federal 8(a) or certified small business in my key market areas and I’ve been so successful that I’m about to graduate from “small business” to “large business” in the eyes of my customers. This is awesome because I’ve figured out my market and I’m on an incredible growth trajectory. BUT—How do I preserve the “special sauce” of being a small business while I grow? How do I maintain my growth trajectory? How should I think about shifting my marketing and sales strategy?

These are tough questions. But the good news is that many successful businesses have survived this kind of transition with flying colors. You can do it too. All it takes is a strong transition strategy.

Oh, and…start early! The surest way to business growth success is giving your team the time and space they need to figure things out. This is just good leadership: giving your team the tools they need to plan for the many aspects of your business that will shift as you move to a bigger playing field.

Big Picture Questions

The following questions will serve you well as you make the transition from a small player to competing on bigger and bigger stages:

1. Where do you want to be?

You’re growing. That’s AWESOME! But what is your vision for success in 1 to 3 years? It might be tempting to plan further out, like 5 or 10 years, but I’m not a huge fan of going beyond 3 years. There’s just so much that can change in your business, the market, the competitive set, technology, etc.

That’s not to say you can’t or shouldn’t have a long term view. But when you sit down to think about your investment strategy and near terms actions, it’s best to keep 90% of it focused within a rolling 3-year timeframe.

So, where do you want to be? Start there and work backward.

2. Who are you? What do you want to be known for?

And as for your special sauce, this is a great time to get clear about it. Keep in mind sometimes what we think is our special sauce isn’t really that special to our customers and partners. This means talk to your clients, your business partners, your employees…ask almost anyone you can think of what makes your business really unique. Ask them to get specific.

Also, steer clear of boilerplate marketing speak and boring platitudes. For example, way too many businesses say, “our people are our differentiator.” But the fact that EVERYONE says this means it’s not true. No business worth their salt is going out there and hiring unqualified people. It should go without saying that you’re hiring the best and brightest that you can get your hands on!

So, what is it about what you do with your team that makes you unique? For your customers, it could be that you always return their calls quickly. Or that you have a process for onboarding that allows them to hit the ground running. For your investors, maybe you’re offering the chance to expand their portfolios in a particular direction.

3. What do we need to get there?

Are there gaps in talent, technology, or process that you will need to fill in the next few years? Have you thought about all the ways that business growth will require your team members to step up their games? Are you prepared to support leadership as they learn how their jobs and relationships will change?

One of the key aspects of a successful transition is being open to seeing shortcomings and accepting where creative solutions are needed. If you aren’t actively seeking constructive criticism along this journey, you are asking to be blindsided. So, start assembling that team of rivals and ask them to be brutally honest.

Think About What the Future Looks Like

One of the best pieces of business advice I’ve heard is “dress for the job you want.” This is another way to say put yourself in the mindset of where you want to be. When a business is transitioning to become a bigger and (hopefully) better version of itself, the same principle applies.

Here are some ways to put yourself and your team in the mindset of where you want to be:

Identify your audience: Now that you’re moving up, your customer set may change. You may be working with new clients who have larger budgets (and expectations that go along with those big numbers). Even your current customers’ perceptions will likely shift as you graduate from small business to large business. Identify their priorities and tailor your sales and marketing approach to their needs.

Shift your competitive set: As you grow, your competitors change too. This is particularly true when moving from a small business that benefits from set-aside budgets and contracts to a large business that is competing in a full and open market.

As you think about your new competitive set, take a good hard look at:

  • Your competitors’ current client lists, testimonials, reviews.
  • How they characterize and position their service and product offerings?
  • How they market themselves (e.g., website, public statements, corporate overview, social media, thought leadership pieces, etc.).

You aren’t doing any of this because you want to copy or steal their ideas. But to stand out from the crowd, you need to know what your crowd looks like. It’s also good to assess what your clients are used to seeing and hearing so that you can stand apart while communicating in the language they understand.

Also, consider the following:

  • Define success carefully. Consider the ideal goal, but also what, at a minimum, will count as a win. Be generous.
  • Do your market research. Don’t skimp on this step! Rushing into a big change without doing the right research sets everyone up for failure.
  • Understand your strengths and weaknesses. Transformation affects every level of your organization. Make sure you identify leaders early in the process and give them what they need to execute their specific missions. Also, look for any gaps in communication across departments. Strategize about how to create more cooperation.

Consider your proof points: Always keep in mind that business growth is an indication that what you’re doing is working. It can feel overwhelming in the process, but if you stick to what you know, that can really help you feel more grounded. Refer back to your track record of solid performance and great results whenever necessary. Also, work with your team to establish reasonable proof points to help you assess your growth roadmap going forward.

Be yourself: Finally, it can be easy to forget who you are in this process of reinventing yourself. So remember to continually reevaluate your messaging. Make sure all of your communications reflect your company’s credibility, self-worth, and core values.

If you are asking some of these questions about business growth or anticipate moving from a small to larger business in the future, my team and I would love to help with the transition. Contact us to schedule your consultation and find out more about how we enable your transformation.

Photo credit: rawpixel.com

M&A issues

What No One Talks About in M&A: Culture Integration and How to Deal With It

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We’ve talked about M&A before—the pros, the cons, where deals can go off the rails—but now let’s talk about what happens after the deal is closed. What comes next and what M&A issues come up?

Once your deal closes and the dust settles, it’s time for the real work to begin: integration. With any luck, you’ve already done some focused thinking about integrating the two firms. You’ve looked at M&A issues such as aligning billing systems, benefits plans, compensation strategies, etc. and you have strategies for each.

But what about culture? What’s your strategy for culture integration? If your reaction here is anything like, “A strategy for culture integration? Oh, the department heads will handle all of that,” you will probably want to keep reading.

Love and M&A Integration

M&A deals that work well are actually a lot like happy marriages. Yes, there will be some upfront work to do on both sides. But once you’ve skipped down the aisle after saying “I do,” you begin a new phase with its own set of challenges. This is the work of meshing together two lives into a cohesive, long term, happy union.

An M&A transaction can be a bit like courtship (ah, and you thought chivalry was dead): You date around for a bit, decide that you’ve found “the one,” get engaged, and then, you throw a heckuva wedding. And when you wake up after the honeymoon, reality sinks in…the thoughts start flying.

  • Thought Bubble #1: For better or for worse…wait, you didn’t tell me about that billing issue!
  • Thought Bubble #2: For richer or for poorer…what happened to the sales pipeline we reviewed?
  • Thought Bubble #3: ‘Til death do us part…why are all the employees leaving?

And as with any new marriage, there are logistical M&A issues that no one really considers before they sign on the dotted line:

  • How are we going to celebrate holidays? (Is everyone onboard and motivated by how we recognize and celebrate success?)
  • How should we handle joint finances? (Do both parts of this new mixed organization share the same fiscal priorities?)
  • How often do I have to see your family and friends? (What’s our customer relationship strategy?)

I’m not suggesting that the key to successful M&A integration is scheduling time for employees to do a bunch of trust falls and escape room activities. What I’m suggesting is that you consider how culture impacts any business transaction in the same way you consider how to maximize earning potential for shareholders.

Lessons from a Culture Integration Fail

Early on in my career, I worked for a multi-billion dollar firm. With much fanfare, we acquired a smaller firm that was highly respected and well-known in the industry for its creativity in “getting things done” for customers.

Within a year of acquiring the firm, the larger company had overlayed all of their big company processes and requirements onto the smaller firm—squashing the very flexibility and creativity for which they had been known (and for which we had acquired them!). Unsurprisingly, half of the employees were gone within 2 years…as were the customers.

While it’s easy to see the internal (e.g., from the employees’ perspective) impact of cultural M&A issues, we don’t often think about the external (e.g., from the customers’ perspective) impact. However, culture certainly does impact customer experience and this is especially true after a merger. For a case study in how NOT to complete a successful integration, check out the Starwood / Marriott merger. Yikes!

The hard lesson learned here: The reality is that human challenges are often harder to smooth over than system challenges. If you don’t anticipate the cultural challenges, it doesn’t matter how prepared you are on the business side. So, how do savvy M&A dealmakers address the human side?

1. Start early.

By early, I mean during due diligence. Yes, cultural fit is a deal maker or breaker! The very things that make an acquisition target attractive may also be the most fundamental to their culture…and the most different from your organization’s current culture.

Make sure that someone on your team is putting together a culture strategy prior to the close of the transaction. At a minimum, this strategy should include:

  • Key metrics for competitive landscape, demographic, and market trends to discuss with leadership.
  • Outlines for any necessary cultural change initiatives (Tip: stick with no more than 2 major change initiatives during the first year).
  • Ideas for creating employee buy-in and a sense of community.

2. Know thyself.

What is your vision for the joint culture? What changes after the deal? What stays the same?

Keep in mind that this doesn’t have to be all or nothing. There are no rules that say that everyone must conform to a single culture or that culture is immutable. In fact, allowing room for the culture to adapt is crucial for long-term viability.

Why are these firms merging? What is valued in each and how can we take the best pieces of our cultures and bring them together respectfully?

3. Focus on building credibility.

In most cases, there is a fairly steep learning curve that happens after a merger. Like moving from dating to marriage, we need to adapt to daily life and its new rhythms. How can we put in place mechanisms to better understand each other? How do we establish trust?

Remember that credibility is earned, not given. When a large firm acquires a smaller firm (especially if the smaller firm was once a competitor), there can be some apprehension. It’s important to warn employees of the large firm that taking a victory lap is not appropriate.

Past is not prologue. So the acquiring firm should look to create the right environment to nurture a bright future and bring the new acquisition into the fold. This will require transparency in sharing plans, following through, listening when challenges are raised, and addressing the concerns of everyone.

This is a key building block for #4.

4. Communicate.

Communicate early and often. Key leadership (ideally those with credibility) should share the aspirations for the combined entity in a clear, straightforward manner and acknowledge that integration won’t be easy. When talking about challenges, be specific. Show everyone that you are committed to making this work and addressing all M&A issues together.

Employees need to know what’s changing, why, when, and what will happen, both in the overall big picture, as well as on a day-to-day basis. They need to understand what the merger means for them and what the new expectations will be.

Communicating is about way more than printing off new motivational posters with the company’s core values and firing off a few “rah-rah” emails. (GAH!!) Cultural integration requires a change management focus, leadership commitment, transparency, a willingness to listen (and integrate) feedback, and continued communication via as many channels as possible…even when you think you’re done, you’re not. Keep going. Like a marriage, you’re in this for the long haul.

Preparing for a big M&A deal in 2019? Check out our guide for working with a Communications Specialist.

The team at Audacia Strategies is ready to stand shoulder-to-shoulder with you as you make a smooth integration, both in terms of systems and culture. Contact us to learn more about how we can enable your transformation and help you avoid serious M&A issues!

Photo credit: rawpixel.com

business goals

3 Big Investments We’re Doubling-Down On in 2019

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January is a good month to take stock—or so my Marie Kondo-loving friends tell me. It really is a great time in the business cycle to think back over the past year, to consider what worked and what could have gone better, and to make business goals for the year ahead.

Here at Audacia Strategies, I’m feeling so much clarity around what types of organizations we serve and where we can add the most value for our clients. Now we can focus on thinking strategically about how to double-down on our biggest investments and accomplishments to bring even more value for our clients going forward.

Here’s a small window into our business goals for the coming year:

The Big 3 for Audacia in 2018

1. We became certified as a women-owned enterprise (WBE): It took the better part of the year to get the paperwork completed, filed, and to receive our certifications (one of our major 2018 business goals). But we are now officially a Woman-Owned Small Business or WOSB (in the eyes of the Federal Government). We are also nationally certified by the Women’s Business Enterprise National Council (WBENC) and received our CBE certification in D.C. We’ll receive additional state-level certifications soon.

Big InvestmentsThese certifications position Audacia to better support clients’ supplier diversity objectives, engage directly with federal, state, and local government initiatives, and support larger-scale projects with diverse financing requirements. Being woman-owned certified also gives us the opportunity to reach a broader audience. We are proud to participate in programs that support and encourage women to own businesses in industries where women have been historically underrepresented.

2. We helped our clients win new business: This is some of the most rewarding and satisfying work we do at Audacia. When our hard work and collaboration results in clients winning new business, there’s no doubt we’re delivering at a high level. This kind of feedback reaffirms that our systems and procedures are working.

For example:

  • We helped an EdTech client land 8 new clients in 9 months by reviewing the market and competitive landscape to develop their product launch strategy, message development, and activate an ongoing marketing strategy.
  • We helped a growing government contractor develop a message architecture and segmented stakeholder messaging strategy to leverage their government expertise to expand into adjacent commercial markets. As a result, they have already inked a strategic alignment contract with a major commercial provider in their space and are in discussions with others.
  • We prepared an established government contractor to attend their first investor conference in their 15-year history. Our team worked to develop investor messaging, (i.e., strategic rationale, value proposition, and investment case development) and an investor presentation for the firm. We trained leaders in Reg FD requirements and presentation delivery. And we equipped key executives to handle “live fire” investor Q&A.

3. We helped our clients get recognized for their innovation: Bringing an innovative product or service to market carries certain inherent risks. But having a strong team behind you to brainstorm ideas, challenge assumptions, and provide an additional perspective can mitigate these risks.

For example:

  • We developed the messaging strategy for an innovative nonprofit in the higher education space. Our client was highlighted as a key innovator in higher education by the U.S. Department of Education.
  • We supported the successful CEO transition of a 55-year old government contractor and the strategy to support the subsequent transformational realignment to more closely align the business with its strategic markets. The firm has achieved higher internal employee engagement and is ready to bring their refreshed message to current and new clients.

Looking Ahead to Our 2019 Business Goals

1. We will forge ahead with additional state-level certifications: This is key as Audacia looks to better support our clients as they, in turn, support their clients. Think: transformational systems implementations. This is not a new business area for us, but these certifications provide a new way for us to enable successful business transformations at all levels.

2. We will continue to support our clients biggest transformational moments/goals/ideas: In 2018 we had the opportunity to support c-suite transitions, mergers and acquisitions, new product launches, and new investor relations strategies. We also expanded and cultivated our network of business partnerships, so that in working with Audacia, our clients gain access to even more strategic resources. We’re going to continue that work in 2019 as we look to help even more companies get the biggest bang for their transformation buck.

3. We will show leadership in promoting corporate responsibility and effective crisis management: Now more than ever, our analyses show investors and stakeholders care about demonstrated success in corporate responsibility. It’s often difficult for firms to evaluate their own cultures and even more difficult to implement change without an outsider’s perspective. If this isn’t on the radar of your leadership, let’s get going and get you on track! This is of special interest for organizations eyeing mergers and acquisitions. Making a strong case in terms of the numbers, may not be enough for investors these days. We’re staying ahead of the game, bringing new service offerings in this area in 2019.

How are you looking to grow and transform in the new year? What big accomplishments and investments from 2018 are you doubling-down on? What business goals do you hope to achieve in 2019?

If Audacia can support you in your business goals, let’s find time to talk about your needs. Your first step is scheduling a 30-minute introductory call with yours truly. Let’s make your 2019 truly transformational!

Photo credit: Cathy Yeulet

murder board

Murder Board—It’s Not As Bad As It Sounds. How to Use Criticism to Prepare Your Team

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When you have what seems like a game-changing idea, what do you do? You probably start by doing some low-stakes, crowdsourced testing. You tell trusted friends and family before taking the idea to friendly colleagues. Eventually, you get around to proposing the idea to those who can help you implement it.

When you go through this early testing phase, you’re looking mostly for validation. This can bolster your confidence, which is great if you’ve hit on a truly great idea. But how often have you watched an idea fizzle and die a slow death all the while wishing you had killed it sooner? This is one reason to seek not only validation, but criticism in the early stages.

In the investor relations and corporate communications world, we have a name for doing this in a formal setting: Murder Board. What is it and how does it work?

Murder Board in Context

The term murder board originated in the U.S. military, specifically from the Pentagon, but is also used in academic, journalistic, government appointment, and business contexts.

Here are a few recent examples:

Political Hearings: As soon as Secretary of Veterans Affairs nominee, Ronny Jackson, was scheduled to go before Congress for his confirmation hearing, officials began intense preparations, including murder board sessions. Reportedly, these sessions went on pretty aggressively during the past few weeks, but have probably slowed a bit now that the Senate has postponed the hearing.

PR Crises: When Mark Zuckerburg went on his recent apology tour after agreeing to testify in front of Congress, he was put through the wringer by a team of lawyers and outside consultants. In addition to a “crash course” in charm, Zuckerberg received a real grilling during murder board sessions. Essentially, his team created as identical an environment as possible and went through a series of real run-throughs of what’s likely to occur. These lengthy sessions were strictly private and videotaped for review and critique.

Also, known as a “red team,” the murder board team’s main job is to poke holes. In the military, the red team tries to penetrate your defenses. In the high tech world, the red team tries to hack into your system. In short, the murder board finds the problems, risks, and bugs that the insiders miss. In high stakes situations, murder board sessions can save you from making a terrible mistake.

Why Is It important?

Murder board sessions might seem like overkill. It’s easy, especially for less experienced spokespeople, to believe that they are prepared for Q&A. But until they have practiced responding to questions under pressure, your preparation is not complete. So, make sure you impress upon your team the importance of setting up a murder board.

1. Prepares you for real-world experience and Q&A.

It’s helpful to consider worse-case scenarios before facing one in real life, so you can strategize as a team. Otherwise, you risk your spokesperson going off script and saying something that makes matters worse. I want my executives and clients to face the toughest questions for the first time in the room with me, not in front of an investor, a client, or a camera. The preparation will remind your spokesperson to focus on the facts and not speculation.

2. Stress tests company-held beliefs.

When pitching an idea or trying out new messaging, It’s always hard to be objective. This is as true of individuals as it is of teams. When you really want to step outside of the echo-chamber of your firm, a murder board with external voices can help.

Use a murder board to test beliefs about:

  • Company preparedness—especially good for crisis communications
  • Messaging—Is your message really resonating?
  • Customer relations—What do we actually know about our customer?
  • The organization—Does our message really hang together? Where are the confusing parts?

3. Stress tests your sales team and sales message.

Role play scenarios with your sales team ahead of a high-stakes pitch. Ask questions such as: How could the meeting go off the rails? What are the toughest questions the client could ask? What are the worst responses to our message we could imagine? Murder board sessions will ensure your team arrives prepared and ready to keep the meeting productive.

4. Gets you away from group think.

The most important part of the murder board process is bringing in a fresh perspective, often that of the client or stakeholder. Forcing a team to consider worst case scenarios requires them to think critically and figure out how to defend their position. Alternatively, forcing them to consider the client or stakeholder view, helps identify any gaps or missing angles that need strengthening.

Murder board sessions are simply the most powerful way to ensure that your media relations, investor relations, or sales team are ready for high stakes interactions. If any of these teams are “winging” high stakes meetings, their lack of preparation could put the whole firm at risk. So, let’s talk about when and how to use a murder board.

When to Use a Murder Board

A murder board can be used for any written or oral communications. It’s all about ideas and messaging. Here are three areas where a murder board can be most beneficial for improving communications.

1. Preparing for crisis situations.

If your firm has never had to deal with a full-on crisis, consider yourself fortunate. But also realize that your big crisis could be lurking just around the corner. It’s always a good idea to have a plan for dealing with a crisis and murder board sessions can play an important role in such a plan.

Assemble your damage control murder board and have them begin identifying issues and vulnerabilities within the company. It’s best if you can assemble a team who understands both the media and your firm’s weak spot. Next, have the team work on questions and ideal answers. These should be the toughest questions they can come up with and the best possible answers based on the facts. Finally, refine the answers and work to prep spokespeople.

2. Preparing for investors.

Murder boards are also great prep for analyst meetings, especially one-on-one meetings where executives need to be on top of their game. Here you’ll want to focus on both the message as well as recalling key company metrics.

For this one you’ll want to call in your toughest internal financial analysts and encourage them to live out their wildest inner Shark Tank dreams. Assemble your investor relations murder board and have them begin coming up with “tricky” questions regarding different angles on the numbers.

For example, suppose your firm calls for 10% year-to-year growth with sounds amazing, unless your biggest competitor comes out with an expected 15% growth rate. Now you’re behind in the investor’s eyes. What does it mean for your business and key competitive differentiators?

3. Preparing for customers.

Customers can be one of the toughest audiences. Murder board sessions are great training for sales teams. Use these sessions to prep them for their sales calls, a big pitch, or proposal presentation.

Assemble your customer relations murder board by having sales people role play with each other. Have newer salespeople play the “customer” role first to test the more experienced team members. Besides the benefits of being prepared for hard questions, this kind of exercise forces salespeople to put themselves in their customer’s shoes.

Final Thoughts

A murder board is an effective way to test your firm’s communications skills in a close to real-world situation. For high stakes interactions, there is no better preparation. Remind your team, though, that this is NOT a hazing experiment designed to throw off another team member. The point is to prepare your team, better understand your messaging, and better relate to key stakeholders.

One way to ensure that you get an objective perspective is to bring in an expert from outside your firm. Audacia Strategies can be that expert voice. We’ve prepared teams for investor meetings, crisis communications, and high stakes business transformations. We’ll help you put on your game face!

Photo credit: racorn / 123RF Stock Photo

ipo roadmap

Audacia’s IPO Roadmap to a Successful Initial Public Offering (Part Three): You Did It! Now What? How to Navigate Life after the IPO.

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Congratulations! Your company is public. With your IPO, your firm has joined the ranks of Amazon, Apple, Boeing, Facebook, and now Spotify. Now let’s talk about life after the IPO.

All of those long hours you put in at the office paid off. Your advance work contributed to a great market introduction. You developed a strong investment case and an IPO story. You identified your key stakeholders. You created disclosure and guidance strategies (and policies to go along with those). You have a solid IR team in place and an informative website. So, your job is done, right?

Well…nope. Sorry.

You’ll want to grab a venti coffee for this…the IPO is only the beginning. Now the hard work of life after the IPO begins.

Yes! There Really is Life After the IPO.

ipo roadmapDon’t get me wrong, going public is an achievement in itself. By all means, take your victory lap. But also realize that having an IPO opens you up to a whole new level of public scrutiny. This isn’t bad news, though.

Now that you have overcome the IPO hurdle, it’s time to follow through on the commitments you made during the IPO. That investment case and IPO story? Now it’s time to execute and deliver against those proof points we developed a few weeks ago (see Part 1).

And, just because you’re listed on the NASDAQ or NYSE doesn’t mean that you can stop telling your story. If anything, you amp up your communications. But where? With whom? How?

Investor Targeting

You likely just finished a road show that was managed by your investment bankers as part of the IPO process. During that road show, you probably spoke to 10s or 100s of institutional investors. And you likely experienced firsthand, on the day your stock listed, that it’s not uncommon for a new stock (a new issuer) to have a lot of initial volatility in its shareholder base.

In my experience, it takes 9-12 months for a shareholder base to stabilize after an IPO. This means that to grow your shareholder base and build shareholder value, you need to have a good sense of the right investors for your stock and a good solid investor targeting strategy.

Where to start? A few ideas to get you started on your investor targeting strategy:

  • Comparable Company Ownership Analysis: Take a hard look at the shareholders of your peer group. Who holds your peers but not you? Might they be a good fit for your stock?
  • Industry Investors: Get to know the key institutions, advisors, and funds that invest in your industry. While many investors are generalists, if they’ve put in the time to learn your industry, generally they will look to expand their portfolio in that area.
  • Investment Style (with a caveat): Institutional investors are often broadly characterized by investment style (e.g., growth, value, deep value, etc.). Consider where your investment thesis best fits within these styles, but also keep in mind that many portfolios have specific metrics to narrow their focus (e.g., investing only in small-cap firms or companies that meet specific Sustainability metrics, etc.). It pays to do your homework.

Also, remember that many investors will find you on their own. During life after the IPO, your phone will likely ring off the hook with investors of all styles and approaches. It’s important to remain accessible and provide consistent information to all investors, whether they are on your target list or not.

Every shareholder owns a piece of your business and deserves your attention and respect. That said, it’s also important to make time in your schedule to prioritize the investors in your strategy.

Outreach

Once you have your target list of investors, you’ll want to put together your outreach strategy. This is an important part of making sure that your story is “out there” and your message well understood by current and potential investors, research analysts, and financial media.

It’s also important to develop relationships with investors, analysts, reporters, and others. Many investors will not invest in a company without having met the CEO and CFO at least once.

How can you reach these stakeholders and keep your current investors up-to-date?

1. Conferences: You’ll likely be inundated by opportunities to attend bank/brokerage conferences, association or industry-sponsored conferences, “pay-to-play” conferences, etc. Choose wisely and try to keep a variety of events on your schedule so that you’re not meeting with the same investors over and over.

2. Road Shows: Non-deal road shows (AKA traveling to meet investors without a specific transaction associated with the discussion) are a great way to meet new investors. Often sell side analysts will coordinate these trips for you with their clients. However, with a bit of research and coordination, you can also put together your own trip. In the U.S., major investor hubs include: NYC, Boston, San Francisco, L.A., and Chicago.

3. One-off events: Is your CFO is heading to NYC to speak with ratings agencies? Set up a dinner with sell side analysts or book a meeting with one of your top shareholders too. Invite investor groups or analysts to visit your headquarters and/or major operations locations. Be creative with schedules and try to keep a relatively open door policy. Don’t waste your C-Suite’s time (or your own). But, to the extent that you can, remain accessible and transparent.

By now, you’re so versed in telling your story that building these relationships is the easy part. Relax and trust in your process. The right investors will engage over time.

Expectations and Reality

This is the big one.

You’ve set up your investment thesis, your guidance strategy is in place, you’ve told your corporate narrative so many times that you can tell it in your sleep. What have you really been doing? You’ve been setting expectations—hopefully, reasonable expectations (note: highly encouraged) for your life after the IPO.

Now, it’s time to deliver. Remember, you’re playing in the big leagues now. So, act like it.

As a publicly traded company your quarterly earnings reports will always be closely watched. But your first year and especially, that first quarter, are utterly critical. Why?

Well, for starters, you’ve built a very small reserve of credibility and goodwill with your stakeholders. If you miss expectations out of the gate, that credibility evaporates quickly. Once lost, you will have an uphill battle to rebuild credibility and trust—the only way to rebuild is to meet expectations. And the only way to avoid this pain, is to meet expectations in the first place.

So, make sure you’re keeping tabs on operations and market conditions, fine tune your corporate narrative, and continue to manage expectations appropriately.

Once you’ve made it past that first year of life after the IPO, you can finally trade in that venti coffee for a bottle of champagne and take several victory laps. In fact, if you work with Audacia Strategies to launch your successful IPO, the first bottle of champagne is on us!

Parting Thoughts

The key to a successful life after the IPO can be broken down into four simple steps:

  1. Set reasonable expectations.
  2. Tell stakeholders about them.
  3. Execute on those expectations.
  4. Tell stakeholders about that.

When your company goes public, you step into the spotlight. Yes, the stakes are higher during life after the IPO. But it’s nothing you can’t handle. You’ve got this!

If you missed Part One and Part Two of this series on how to launch a successful IPO, be sure to go back and review.

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building an IR program

Audacia’s IPO Roadmap to a Successful Initial Public Offering (Part Two): How to Build an IR Program

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A successful initial public offering requires syncing up several moving parts. If doing a product launch feels like playing “Twinkle Twinkle Little Star,” an IPO feels like playing “Beethoven’s 9th.” Of course, to play a symphony, you need an orchestra. For your successful IPO, that means building an IR program.

If you missed Part One, we discussed how to develop your IPO story. Once you have your story, it’s time to get operational. So, this week we’ll look at answers to the following questions:

How do you structure your IR program?

Who are the key partners and players?

What are the key tools and policies that will set you up for success?

Without further ado, let’s talk building an IR program.

First, Know Your Goals.

We’ve discussed what IR is and isn’t before. The main purpose of IR is to ensure a company’s publicly traded stock is fairly valued by disseminating key information that investors use to make smart buying and selling decisions. IR departments communicate with investors (obviously), research analysts, regulatory and oversight organizations, customers, suppliers, media, and the broader financial community.

ipo roadmapA solid investor relations plan will help guide your IPO discussions and ease your transition to a public company. The most important job? Establishing and building corporate credibility with your stakeholders through transparent and consistent communication.

Second, Gather Your Tribe.

Once your goals are clear, you can start to build your dream team of IR professionals. Hopefully, you have established and maintained strong business relationships over the years. Don’t be shy about calling on these contacts now.

Consult the following key partners and players:

Internal relationships: financial planning and analysis (make this a priority!) and finance team, general counsel’s office, external legal counsel, communications team, treasurer, business unit leads, product/service SMEs, and the C-suite.

External Relationships: service providers (Bloomberg, Nasdaq, IPREO, etc.), brokerages (JPMorgan, Jeffries, Goldman Sachs, etc.), stock surveillance (if using), public relations (if using and partnered with your internal communications team), your audit team (e.g., Deloitte, PWC, E&Y, etc.), and investment bankers.

Tools for Building an IR Program

We cover the basics below. Although we could get into using CRM systems, integrated blast email services, etc., for today, let’s keep it simple. Shall we?

Website: Your IR website is perhaps the most important tool for building an IR program and a non-negotiable requirement. Not only is your IR website often investors’ first introduction to your company and a perfect vehicle for disseminating your investment story, it’s also absolutely critical for conforming with compliance and disclosure requirements. I could go on about websites and their importance—a topic for another day!

Here are key recommendations to keep in mind for your IR website:

    • Make investor content easy to access—consider the user experience when designing your site.
    • Provide content that accurately describes your compelling investment thesis.
    • Keep the most requested information easy to find and download, i.e., earnings materials, investor presentations, etc.
    • Make contact information readily available. If you plan to be active on social media, include those links as well.
    • Make it mobile responsive—always good website etiquette!
    • Include governance information—officer and director information, committee charters and ethics documents, committee memberships, etc.
    • Keep a running list of company news/press releases.
    • Ensure that data feeds from the SEC and streaming stock quotes are accurate and timely.

IR platform: This type of tool will help to track consensus estimates on your firm and others, trading patterns, analyze your shareholder base, research and target new investors, review ownership trends, etc. These services also generally offer access to event transcripts, earnings materials, and industry, market and company analyses.

Many providers offer this type of service at varying price points. So, shop around. To operate efficiently and quickly it’s important to have situational awareness of your firm’s position among peers and within the market. These tools help you to track just that.

  • Examples include: Nasdaq, IPREO, Bloomberg, and others.

Stock Surveillance: While not a requirement—it can be pricey—this type of information can be incredibly helpful to understand the ebbs and flows within your shareholder base. It can also be a lifesaver when your CEO sticks her head in your office and says, “what the heck is going on with our stock today?!”

Stock surveillance is a service that focuses on tracking and analyzing movement in your company’s institutional shareholder base. Service providers will use a combination of publicly available data as well as proprietary and research-based methodologies and technologies.

There is a mix of art and science in this tool. It can be controversial, but I’ve found it to be very helpful in providing situational awareness. It is particularly important during times of crisis (market or company).

Key Policies for Staying on the Straight and Narrow

Every public company must decide whether and to what extent to give the market guidance about future operating results. The decision whether to give guidance and how much guidance to give is an intensely individual one. There is no one-size-fits-all approach in this area. The only universal truths are (1) a public company should have a policy on guidance and (2) the policy should be the subject of careful thought. As you continue building an IR program, keep the following policies in mind.

1. Reg FD

We’ve discussed Reg FD policy a few times. Specifically see:

Here are the highlights: Regulation FD is a fair disclosure rule, not an anti-fraud rule. This means that only conduct that is intentional or reckless can be considered a violation. Both companies and individual personnel can be held responsible and are subject to SEC enforcement actions.

Such enforcement actions can include injunctions, fines, and obligations to disclose the violation.

For more information about Reg FD and the SEC’s enforcement of the law, check out this list of frequently asked questions. But always remember that nothing you read online, including this article, is a substitute for qualified legal counsel.

2. Disclosure Policy

Your disclosure policy outlines the information your company will communicate on an ongoing basis and demonstrates your commitment to transparency. Avoid making the policy too narrow. It could come back to bite you during any potential litigation. Decide in advance who will be taking calls from various audiences. Spokespeople should respond to all calls as soon as possible, but most definitely within 24 hours.

This policy generally designates company spokespersons, approved channels of disclosure (website, SEC filings, social media, if your firm chooses to do so), handling of earnings and forward-looking guidance, and quiet periods.

A note on quiet periods:

The purpose of a quiet period is for a public company to avoid making comments about information that could cause investors to change their position on the company’s stock. There are no official guidelines on quiet periods. Practices vary by company requirement—for example, a Mega-cap firm that is part of the Dow may consider its quiet period to begin 2 weeks before the end of the fiscal quarter and conclude with their earnings report after quarter close.

However, a small-cap firm that is lightly covered may need to continue to take calls—even if they cannot answer some of the investor questions. In general, during a quiet period most companies either (a) allow no formal or informal communications at all (AKA all calls go to voicemail) or (b) allow limited communication and interaction with investors/analysts by:

  • Answering only fact-based inquiries
  • Sharing information only on overall long-term business and market trends
  • Announcing if it expects financial results to differ materially from earlier forecasts

Again, it’s hard to generalize here. Having a policy tailored to your IPO ensures that everyone knows the plan and has a common starting point.

3. Stock Trading Policy

The SEC has recently stepped up its efforts to detect suspicious trading. Sophisticated data analysis tools track shady patterns such as “improbably” successful trading across different securities over time. Many firms also make use of behavior analytics to uncover activities that could potentially lead to a range of trading illegalities.

Your stock trading policy should contain information for directors, officers, and employees to prevent insider trading. This article contains a list of best practices from someone charged with and convicted of insider trading. Hindsight is 20/20, right?

Concluding Thoughts

As with so many aspects of taking your company public, preparation is critical to success in building an IR program. So make sure that you have positioned your company to be successful in IR. An effective IR program will be critical to avoid stumbling out of the gate with investors and will help you to build shareholder value for the long-term.

Audacia Strategies can assist your company in building an IR program. We offer everything from investment case development to talking points for IR executives to financial guidance and forward-looking positioning. Let us know how we can help!

Next up: Congrats! You’re Public. Now What?

Photo credit: Andriy Popov

IPO roadmap

Audacia’s IPO Roadmap to a Successful Initial Public Offering (Part One): Developing Your IPO Story

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Okay, your firm is ready to “go public.” Congrats! So… now what?

There are several competing theories about what makes a company IPO-ready. Some bankers and VCs cling to the “$100 million revenue” benchmark like religion. Others look to predictability, visibility, or growth measures. Still others bank on formulas for assessing vulnerability in the market.

We’re not here to adjudicate among these theories, though. If you are planning an IPO, we know that you and your team have done the hard work to prepare. And, while there’s a lot to prepare for during this time, I’m here to remind you that the IPO is not the end game. Going public is more like moving from college sports to going pro. That’s where Audacia Strategies comes into play. Our IPO roadmap will show you how to hit the ground running before AND after your company goes public.

IPO RoadmapOnce you’ve decided to take your company public, you’ll find there are several moving parts. So we’re breaking this one down into a series of blog articles on developing your IPO story, building an IR team, and living with your IPO. Let’s get into it!

First Up: Developing Your IPO Story.

Perhaps you’re running a wildly successful startup…

Perhaps you’ve been in business for years and are finally experiencing your overnight success…

Or perhaps your firm will spinout of a larger firm…

Regardless of your path, you’ve likely been prepping your S-1 filing for months (at least)—eating late night pizza and spending more time with lawyers, auditors, and bankers than your family and friends. Now that the dream is becoming a reality, it’s time to get serious about how to share your story.

1. Determine your audience.

During an IPO you’ll have multiple filings that describe your business, your risks, and your opportunities. While you’ll likely be talking to several different audiences at this stage, it’s important to develop a coherent story that brings everything together.

Depending on the type of business, your audiences for your IPO roadmap could include the following:

  • Institutional investors: Shortly before your listing date, your bankers will coordinate a roadshow for your management team to meet institutional investors in person (and sometimes via video teleconference).
  • Credit ratings agencies: If you are issuing public debt, you’ll also have discussions with the credit ratings agencies. In the US, the three primary rating agencies are Standard and Poor’s Global Ratings, Moody’s Investors Service, and Fitch Ratings. These agencies assess the creditworthiness of the debt securities and their issuers.
  • Sell side analysts: You’ll also want to cultivate relationships with sell side analysts who will cover your firm for their brokerage.

Each of these audiences will have different priorities and will want to focus on different areas of the business. You need to be aware of and prepared for these different stops along the IPO roadmap. But the overarching investment thesis for your business should remain consistent.

2. Create a narrative arc that answers the question “why buy this stock?”

Tell your unique story: Do NOT steal language from peers that have recently gone public. Yes, this actually happens.

If you’re thinking about going public, your firm has likely been in business long enough to have identified and proven its value proposition. This is the time to continue to refine that message and share it. Explain what makes your businesses different from your peers and competitors. Why are you better?

Go beyond table stakes (e.g., a strong management team, “customer intimacy” of your sales team, etc.) and get to meaningful differentiators—unique products or services, industry-changing technology, patents, contracts, etc. You get the picture.

Investors have thousands of options in the public markets. Tell them why your firm is worthy of their dollars. For more tips on telling your corporate story, see our previous post.

3. Establish credibility and proof points.

We’ve may have mentioned it once or twice before, but it’s worth repeating—credibility is key. And during an IPO, credibility is quite literally going to be your stock-in-trade.

If you can—show rather than tell. Use your (audited!) numbers to show your track record of delivering solid performance—bonus points if your firm can demonstrate resilience during challenging economic times. Go beyond the income statement! Balance sheet strength and liquidity matter as well and cash flow always counts.

Establish reasonable proof points that will demonstrate the success of your strategy as you follow your IPO roadmap. Not all investors will buy into your stock on Day One. But if they watch your firm for a year after the IPO, they should be able to see the proof points of your story play out in your firm’s performance.

Remember that companies trade on future value, so be intentional in explaining your long-term investment thesis and why your business model will generate results over the long-term.

Be transparent. Your S-1 will exhaustively list the potential risks that could face your firm and you can expect potential investors to zero-in on those and ask about them. Risks could include current legal issues, location in markets that could see political or social unrest, reliance on materials that have significant pricing swings, etc. Be sure that your messaging explains why your business strategy mitigates potential risks.

4. Set reasonable expectations.

Set your guidance strategy early. You will want the information provided during the roadshow to be consistent with that given during subsequent investor meetings, conferences and earnings announcements. Inconsistency will call into question your management’s credibility and challenge your firm’s valuation.

Alas—there is no Google-able response to “What should be my guidance strategy?” And, like a tattoo, guidance expectations once set are very painful to remove.

But here are some guidelines I use when developing an IPO roadmap for clients:

When considering guidance, earnings, revenue, and cash flow projections are table stakes. You should also consider qualitative measures—providing “color” or directional information on key metrics driving your firm. Examples might include: perspective on your customers’ buying habits, impact of the economy on supply chain, and sales pipeline development.

Of course, to develop your guidance strategy you first need to assess how much visibility you have into your company’s financial results. IPOs are exciting and you should absolutely exhibit enthusiasm for your firm’s future prospects. However, if your financial forecasts are less than clear, you may wish to keep your guidance broad until you develop greater insight into the near-term business fluctuations.  

Finally, set expectations with the following in mind: your first earnings announcements following IPO will be closely watched to see how the company’s performance matches expectations set during the roadshow and how the management team characterizes the firm’s performance.

5. Stay consistent.

Consistency may be the single most important factor when telling your IPO story. It’s easy to get tunnel vision with all of the financial filings and discussions during an IPO process. But don’t forget that the company is communicating with the public in other venues—media relations, public affairs, government relations, sales teams are all speaking with key stakeholders.

So, it’s worth the time to review press releases, websites, fact sheets, blogs, social media posts, and even executive biographies to ensure consistent disclosure.

Take the time to set up internal processes to review existing communications and maintain a consistent message across all communications channels as part of your IPO roadmap. Investors, customers, and journalists can (and do) conduct due diligence on companies. In the era of the Internet and social media, all communications are instantly available across your audiences. They aren’t likely to easily forgive and forget.

Once you’ve decided to go public, the fun—and by “fun” I obviously mean “serious work”— really begins. But you know that. You wouldn’t be here if you shied away from taking bold action and bold action requires serious work. It also involves coordinating moving parts. And, we don’t mean to brag, but at Audacia that’s kind of our superpower.

Contact us and schedule your free consultation to find out more about your IPO Roadmap.

Next up: How to Build an IR Program to Support Your IPO

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media monitoring

Does Your Firm Have a Communications Early Warning Strategy?

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Nothing teaches us the value of media monitoring and early warning systems quite like a crisis.

As we sit glued to news coverage about hurricanes hitting the southeast and wildfires lighting up the skies in the west, we watch social media to make sure our friends and family heed official warnings.

Somehow, it’s a whole different story when it comes to corporate communications though. Here most of the focus seems to be on crisis management, rather than prevention. We’ve seen too many horror stories of firms that wait until they are in the throes of a serious crisis before they seriously consider how to manage their communications.

If this hits a little too close to home, no judgment! Check out our previous posts on crisis communications here and here for more tips on planning for and managing through a crisis. And once you’re back to smooth sailing remember that having a strong media monitoring strategy makes crisis management a whole lot easier.

Because it’s simply no fun to learn the hard way that having a strong media monitoring strategy reduces the time and energy an organization spends in crisis mode, let’s discuss how to use communications as an early warning system.

What to Watch

Before developing the right strategy for your firm, it’s important to figure out what you should be looking for. Today, let’s focus on three key audiences to consider when developing a media monitoring plan:

1. Investors,

2. Customers, and

3. Employees.

It’s important to remember that each of these audiences represents a separate, though potentially overlapping, audience. This means that your communications team will need to monitor different types of media and create different types of communications targeting each group. For example, you are likely to learn more from surveys custom-designed for each major audience segment, than from one general survey sent out to your entire email list.

1. Investor Relations Communications as an Early Warning Signal

When it comes to investor relations, the early warning often comes as much from what investors don’t say as from what they do say. I’m not saying you should try to read your investors’ minds, but media monitoring around the publications your investors read can help keep you in a “ready stance.” You may be surprised at what you can learn about investors’ desires by watching subtle fluctuations in the market and media coverage of the market.

The same holds for direct communications with investors. For example, you should have a sense for how your shareholder base will respond to your quarterly earnings and incorporate that knowledge into your earnings communications. If your CEO finishes a quarterly earnings  meeting and made some important announcements, but there are no questions from stakeholders on those announcements, that could be a sign that the information wasn’t presented clearly enough or that investors aren’t sure what to do with the information presented.

Investors aren’t known for being wallflowers. If there’s an elephant in the room, it’s best to face it head on, rather than waiting for someone else to bring it up. Listen carefully to the sound of silence.

2. Customer Feedback as an Early Warning Signal

We all know that listening to customer feedback is crucial for raising brand awareness. But often this type of communication comes too late to really be helpful as an early warning signal. Again, keeping a lookout for subtler hints about how customers are feeling about new products, a new marketing campaign, or a PR strategy is key.

Here, it can be helpful to consider your broader business ecosystem. What are the trade publications saying? Distributor channel publications? And, if your budget and time allows, don’t underestimate the power of focus groups before launching a major new initiative or product.

In addition, social media is probably the best way to get a read on customer perceptions in a more timely manner. But in order for this to be most useful, it helps to have a dedicated media monitoring team for social media.

Here are some items your social media team ought to take into account:

There is no doubt that social media complicates corporate communications. Although monitoring social seems straightforward, what constitutes “good listening” will depend a great deal on your firm’s particular strategy. There’s a big difference in public perception, expectations, and customer engagement with a brand, like Starbucks, that receives millions of mentions per day and with a regional brand that may only see thousands of mentions.

Also, keep in mind that your day-to-day social followers are not necessarily the same people who will come out of the woodwork during a crisis to put their opinions out there. While your media monitoring team’s goal should be crisis prevention, when crisis happens, it can be a relief to remember that the “instigators” involved may not be your regular followers and they may even use different channels from your regular followers to make their voices heard. This means your team needs to listen broadly to develop a well-rounded perspective.

3. Internal Communications as an Early Warning Signal

The final component of putting together a strong corporate communications plan designed as an early warning system is closely watching internal communications. While internal staff may not be as forthcoming with warning signals as the two groups above, there are important signs to look for here as well.

When we at Audacia Strategies work with a new client, it’s always interesting to gather information about the company’s culture. If morale is low, it can be difficult for someone on the inside to determine what’s really going on. This is where bringing in an expert team can really be of value. Quite often, the outside perspective helps companies catch issues early and make the proper adjustments.

Also, in many cases, internal staffing changes serve as the proverbial canary in the coal mine. Data like sudden drop-offs in productivity, a decrease in retention among new employees, and an increase in whispering around the “water cooler” can be signs of bigger challenges on the horizon.

Media Monitoring Resources:

It’s important to budget for the right resources to meet your needs, but you can forget about trying to benchmark against others or buying the slickest new media monitoring software to hit the market. So don’t waste resources, while (simultaneously) being less prepared. Your best resources are a thoughtful crisis communications plan and a consistent practice of listening to your key audience.

That being said, there are several automated media monitoring systems available that could work as a first step depending on your needs. Still, bear in mind that even top-notch software won’t allow you to “set it and forget it.” Monitoring tools are incredibly helpful, but fallible. There’s no complete shortcut, but a thoughtful and strategic approach will help you prioritize your budget and your interactions.

Wrapping Up

Just as creating a game plan on the fly is not a roadmap to winning the 2017 US Open Tennis Tournament (way to go Sloane Stephens and Rafael Nadal!), creating a media monitoring strategy on the fly during a crisis is not a roadmap to communications success.

Companies with a record of successful communications know that media monitoring is a central part of preventing or at least, getting out ahead of any crisis. Our team is ready to work with you to develop the right strategy to create your personal early warning system. Let’s get you out of the path of your next communications crisis!

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mid-year earnings reports

Breaking Down Mid-Year Earnings Reports—What Investors and Analysts Expect

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We have just crossed the mid-year point in the world of stocks, bonds, and financial markets. Q2 is officially in the bag! That means most firms are busily preparing and reporting their mid-year earnings reports (10-Qs), while many investors are anxiously waiting with bated breath.

Because 71% of publicly traded companies follow a calendar fiscal year (outliers include Apple and the US Federal Government (YE Sept 30), FedEx (YE May 31), and Microsoft (YE June 30)), investors and analysts look extra closely at earnings reports this time of year. And for good reason—mid-year earnings reports can be the key to assessing a company’s full year outlook.

So, let’s talk about what you should keep in mind as you check out your peers’ mid-year earnings reports and prepare your own.

Mid-year Earnings Reports and Expectations

Earnings reports have everything to do with expectations—measuring a firm’s performance against past expectations, setting expectations for a firm’s future performance, and most importantly, defining a firm’s position relative to market expectations.

The skill with which you communicate these specifics can affect analysts’ valuation of a firm, which in turn affects investor perceptions.

As Gerald Loeb (founding partner of E.F. Hutton & Co., a Wall Street trader and brokerage firm) put it so well, “stocks are bought on expectations, not facts.” This is true. But, as we also know, expectations depend on facts. So let’s look at the facts that are most relevant.

(Not) Just the Facts

What’s essential to communicating mid-year earnings reports is to paint the best possible picture, given the available facts. But what does painting the best possible picture mean in this context? It means evaluating Q1 and Q2 against the major milestones laid out in your 2016 strategic plan and making the best case, true to your numbers, for seeing continued momentum in Q3, Q4, and beyond.

At midyear, generally speaking, analysts and investors are looking at three main indicators:

1. Is the company on track to make full-year guidance?

Often at mid-year companies will have enough insight into their full year outlook to raise or lower guidance (projections for future earnings). Although companies are not required to provide guidance, it is common practice and can be a powerful tool for setting expectations. But the decision about whether to give guidance and how much is an individual one.

Factors to consider when it comes to guidance:

  • Primary Liability: Several provisions in the federal securities laws can create liability for forward-looking statements. For example, Section 11 and 12 of the Securities Act of 1933 impose liability on issuers, their officers and directors, and underwriters for misstatements or omissions of material facts. Because of the potential legal issues here, it’s important for those giving guidance to speak carefully, completely, and deliberately.
  • Safe Harbors: The Private Securities Litigation Reform Act (PSLRA) of 1995 enacted safe harbor provisions for forward-looking statements that are identified as such and accompanied by “meaningful cautionary statements” that could cause actual earnings to differ from guidance. However, PSLRA safe harbor provisions do not apply to IPOs or enforcement proceedings brought by the SEC.
  • Regulation FD: The prohibition on selective disclosure of material nonpublic information should also be taken into account in any discussion about whether to provide or update guidance. Guiding analysts about future earnings is permissible under Regulation FD, as long as the general public is informed at the same time.

This article from a Harvard Law School forum offers a more detailed overview of what public companies should know about giving guidance. Keep in mind, though, that there’s no substitute for consulting the pros when it comes to navigating the choppy waters of when to provide guidance and when to raise or lower these expectations.

2. What progress has the firm made against strategic initiatives?

If you are presenting mid-year earnings reports during a call with investors, it’s always a good idea to start with an overview of past strategic initiatives and whatever progress you have made toward your goals, e.g., entering a new market, cost takeout, R&D, integration of a recent acquisition, etc.

In going over the details of your progress, be as specific and transparent as possible. Analysts and investors like to hear specific examples backing-up statistical claims. So if you claim, for instance, that revenues for a certain sector grew 6% in Q2, be sure to talk about what exactly impacted earnings. Did a new licensing deal pan out? Was a particular marketing approach successful? Did you hire a fresh, young whiz kid who is setting the world on fire?

Point out opportunities for capitalizing on the momentum you’re building and places where it would be prudent to pull back temporarily or long-term. Be candid about any milestones or strategic initiatives that were less than successful too. As a favorite former boss used to say, “Don’t take it on the chin.” Rather, put the challenges in context and talk about what you’re doing to correct course or why you expect industry trends to shift. Not every initiative works. Real talk from your executives can go a long way in building trust over time.

Don’t forget to include non-financial achievements here as well. If you landed any new business deals, signed any new clients, launched a new R&D initiative, made progress on building your management team or on other recruitment efforts, this is all relevant information for assessing your firm’s progress. Remember to drive your points home by reiterating your key takeaways at the end of this section.

3. Is this company’s narrative consistent with what we know about the industry and the company’s strategy?

Industry commentary is one of the most complicated pieces of any mid-year earnings report. Any inconsistency between your comments about industry trends, e.g., predictions about shortages and surpluses of raw materials, and your peer companies’ comments are instant red flags for analysts and investors.

Outlier comments will be pressed during Q&A. This could be a good thing, if used strategically. Taking a novel view of your market or industry could indicate a key differentiator in market approach, which could be indicative of future earnings outperforming guidance (investors are always looking to capture alpha!). So, it literally pays to be prepared.

However, if your commentary goes against conventional wisdom or contradicts previously discussed strategic goals (i.e., your investment case), it will get more questions and be met with skepticism—guaranteed. When you know you are saying something that analysts and investors will find surprising, make sure you can succinctly lay out your case. Companies that can carve out a unique perspective (aligned to overall strategy) and back it up with data and performance, will generally see the the market appreciate those moves.

All the above barely scratches the surface and there is a lot more that could be said about each of these indicators. But, of course, the most valuable recommendations for preparing mid-year earnings reports are those specific to your firm’s needs and your industry’s trends.

So, if your investor relations strategy is in need of a touch-up, the experts at Audacia would love to help you paint the best possible picture. Contact us today to set up a consultation.

Photo Credit: Dmitriy Shironosov

 

investor relations’ relevance

From Niche to Necessity: 3 Tips for Increasing Investor Relations’ Relevance in Your Firm

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Today’s, investor relations pros do a lot more than just talk to the Street. We serve as a critical conduit for information between the Street and internal business channels AND as a connector of information within companies. Everywhere we look, investor relations’ relevance is rising.

It’s more important than ever for organizations to find IR experts who can wear multiple hats and deliver value across the organization. Let’s discuss the drivers of change and how modern investor relations pros are adding value.

Drivers of Change in Investor Relations’ Relevance

While there has always been (and still remains) a bit of a mystique around investor relations experts, that mystique is beginning to fade and make way for more of an MVP role in companies.

Historically, IR as a function was considered mainly for big companies and primarily to communicate with investors about big events that could affect a company’s stock valuation. As a result, traditionally, investor relations’ relevance was seen as more of a back-office function, which involved responding to queries from private investors about non-receipt of dividends, annual reports, share certificates, or legal cases about ownership of shares. Institutional investors interested in contacting the company would meet directly with the CFO or CEO.

But times have changed. The demands from both the sell side and the buy side have intensified because of less reliance on expert networks, increased regulations, the pace of communications, and technological advancements. Additionally, increasing numbers of startups, especially in the software sector, has led to increased investment opportunities.

3 Ways Successful IR Professionals Provide Value:

What used to be purely a communications and public relations role has quickly evolved into a specialized blend of key front-office responsibilities. Today’s Investor Relations Officers (IROs) are responsible for conducting competitive analyses; supporting corporate portfolio-shaping activities (AKA M&A, divestitures, etc.); ensuring regulatory compliance; engaging in corporate sustainability efforts; and acting as in-house market structure experts.

Let’s look at just a few of the ways IR adds value:

1. Playing a more direct role in business strategy formation.

According to the most recent Korn-Ferry survey, 67% of Fortune 500 executives rate having a strategic mindset as the most important leadership characteristic for CCOs. But we didn’t need a survey to tell us that IR professionals are taking on more leadership roles within companies.

Taking the lead on communicating and positioning naturally means deeper knowledge of business operations—such as budgets and forecasts, financial planning and analyses, IT systems, risk assessments, and other facets of the enterprise.

2. Dissecting the financial analysis of peer companies.

Successful IR professionals not only have a deep understanding their own firm’s business operations, but they also research the finances of their peers. Modern IR pros are especially well-situated to do this work because they increasingly come from finance or analyst backgrounds and 72% have worked for three to six companies over the course of their careers. Companies are smart to use this institutional knowledge to their advantage.

3. Communicating the company’s position in highly tailored ways.

Yes, communications is still a big part of the work that IR professionals do. But even this traditional role has evolved. Communicating with stakeholders is more complicated than ever. As investor populations become increasingly diverse, there are more complicated market forces to take into account. It makes perfect sense that IR experts rely upon their comprehensive understanding of the company when communicating with investors and other stakeholders.

Lessons and Recommendations:

So what does all of this change mean for individual IR pros and their corporate partners?

First and foremost, valuable information needs to be shared. The relationship with the Street means that IR pros get a candid (often unfiltered) view of the company, the market and the competitive environment. Investor relations’ relevance has grown largely because sharing this information with the rest of the company is easier than ever.

This information needs to be shared:

1. With the C-suite – for situational awareness, strategy development, market approach, messaging, and as fodder for future investor meetings. Obviously. Depending on how your C-suite likes to receive info, this may take the form of a quick email or text or conversation; an end-of-day update from a conference; or a weekly/monthly update on the state of the firm’s communications and/or market movement.

2. With the broader leadership team – trends in investor/analyst comments must be shared with the extended team. This is valuable information about our market and competitive environment. It also provides real-time feedback on strategy… are we hitting our milestones (and communicating that we do so)? What do investors like about our competitors? What do they see as our key discriminator? (Sometimes that’s different than what we might think!) What are they watching in the industry? What do they ask about most? (Think: interest rates, low barriers to entry, regulations, pricing pressure, etc.).

The key is to offer trends in feedback combined with insight about your company’s competitive positioning, trading dynamics, and market conditions. The goal is to provide unique insight that business leaders can use as they assess their operations, competitive strategy, and markets. Often, this takes the form of a weekly/monthly or even quarterly updates as part of your quarterly business review process.

3. With employees – this is both outside in AND inside out. As important as it is to spend time with investors, analysts and other financial stakeholders it’s equally important to spend time learning more about your company.

Personally, I have found it incredibly helpful to make it a point to visit distributed corporate locations regularly. This serves two functions. First, it gives me the opportunity to get a better understanding of the operations of the business, check out a manufacturing line, spend time with the local sales team, get a demonstration of the latest R&D projects, etc. All of this is important to being able to discuss the depth and breadth of our business initiatives.

Second, I recommend returning the hospitality by holding an open discussion about how your company is traded and viewed by Wall Street. Discuss what it means to be a “deep value” or “growth” stock. Discuss what your institutional holders look like and why. Discuss your peers institutional profile and any similarities/differences. And, share some of those key trends in Street feedback.

Among distributed sites/field sites there sometimes is a perception that HQ roles are disconnected from the realities of the business operations. By sharing the Street perspective, you can make a more direct connection to an employee’s day-to-day work and the company’s performance and public perception.

Conclusion

Increasing regulatory, technological, and investor demands have profoundly altered investor relations’ relevance. What was once primarily a communications function has been transformed into a leadership position requiring economics, finance, and business operations expertise.

The evolution in investor relations’ relevance provides an opportunity to share critical market feedback more broadly and strengthen the connection between internal and external operations. It’s also an optimal moment to engage partner firms that are prepared to embrace the expertise of their IR professionals and showcase it as a differentiating factor.

Audacia Strategies has been evolving right alongside this new era in IR. Isn’t it time that we talk with you about your investor relations goals?

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