Posts

best communications practices

“Chaos is Our Brand”—Takeaways from an Interview with Katy Herr, CEO of Audacia Strategies

/0 Comments/in , , , , /by

Friend of Audacia Strategies and CEO of Quantive, Dan Doran, interviewed Katy about the advantages of running an “out-of-house” communications firm, best communications practices during times of transition, investor relations, M&A strategy, Amazon’s acquisition of Whole Foods, and much more.

Here are some of the biggest takeaways and highlights from their in-depth conversation.

1. Don’t Wait to Create a Communications Strategy

Organizations most often look for experts in investor relations and strategic communications during big transitions. For example, a government contractor might decide to take operations in a commercial direction or a firm may contemplate a game-changing merger or acquisition. Whether or not your organization ultimately decides to bring in a firm like Audacia Strategies to help during such a transition, the most important thing you can do is start strategizing early.

Many of our clients contact us when they’re facing one of two situations: times of crisis or times of transformation—hence our unofficial tagline: “chaos is our brand.” This makes a lot of sense, but too often what we find is that if an organization hesitates to develop best communications practices and a communications strategy early enough, things can go off the rails quickly.

Say your board is about to fire your CEO, when someone leaks the news on social media and all hell breaks loose. What do you do now? Dealing with this kind of challenge is never fun, but it is much easier if you have a strategy ready to implement. If you have a plan, you can stabilize the situation quickly and move past the crisis.

So, why look to an outside “hired gun” to help develop a best practice communications strategy?

Here are a few of the benefits of using an outside communications firm like Audacia:

  • An outside set of eyes gives you transaction experience, critical perspective, and unbiased advice when communicating your message to the outside world.
  • An outside firm is in a good position to place your organization in a broader context (i.e., the competitive set, the market, and your financial stakeholders), while you focus on running day-to-day internal operations.
  • An outside firm isn’t influenced by the “groupthink” or silo-ed communications that can be an obstacle to projecting the strongest public image.

2. Think About Who Your Stakeholders Are

Part and parcel of creating a winning communications strategy is thinking about who your stakeholders really are. Whatever you do, don’t skimp on the stakeholder analysis. Remember that at its core communications is about storytelling. And just as you wouldn’t tell the same story in the same way to your 4-year-old nephew as you would to your 85-year-old grandmother, you wouldn’t tell the story of your company in the same way to different types of stakeholders.

Depending on whether you are a publicly or privately held company, stakeholders could include any or all of the following sets:

  • Employees
  • Financial stakeholders:
    • Public debt holders and ratings agencies
    • Private equity companies and banks
  • Community partners
  • Business partners (non-financial)
  • Strategic partners
  • Customers

3. Understand the Difference Between Marketing and Communications

It’s also important to realize that even if you have an internal marketing department or marketing agency responsible for communicating your message to customers, you may still benefit from enlisting a corporate communications or investor relations firm to help communicate with other stakeholders. We see both marketing and communications as valuable tools for building relationships.

Whereas marketing primarily focuses on telling the story of how your product or service will help your target customers, strategic communications partners can knit together the entirety of the business story to give investors and other stakeholders a comprehensive picture. As experts, we provide you a strategy leveraging communications best practices honed over many transactions, crises, and change events.

We look at how individual aspects of the business including operations, business development, human relations plans, contracts, real estate holdings, etc. fit together to create a holistic picture of value and determine how to communicate that value to each stakeholder segment.

In addition, while many firms have annual strategic planning sessions, often leaders and employees are too busy putting out fires day-to-day to think much about the broader picture. By opening this conversation, we give firms the space to look at the competitive space and customer environment, for instance, and ask big questions about how their market might respond to their actions, how resources should be optimally redirected, and how to keep investors engaged through the transition.

4. Gain Fundamental Communications Building Blocks Regardless of Revenue

At Audacia Strategies, our team has worked to develop best communications practices for companies with billions in revenues and an established shareholder cohort and companies that are pre-revenue looking for their first round of funding. While the scale and scope are different, the communications needs of large and small firms are remarkably similar.

There are some “blocking and tackling” basics that hold when it comes to analysis, building customer relationships, and considering how to communicate your value to the marketplace. These are fundamental whether you’re pitching friends and family or venture capital firms.

Fundamental communications questions to ask:

  • How do we want to talk about this new capability?
  • How do we demonstrate knowledge, understanding, and awareness of the market we’re going into?
  • Are there legal, financial, or cultural requirements that we should keep in mind?

5. M&A Tips and Tricks

When it comes to M&A (mergers and acquisitions), Audacia Strategies can support teams in many different capacities. We work with corporate development teams, in-house financial teams, lawyers, and investment bankers helping them think through the market and storytelling from an M&A perspective. For publicly traded firms, given the disclosure requirements, if you can tell the right story from the beginning, the whole process will be easier.

For example, when murmurs of Amazon working on a deal to acquire Whole Foods first hit the news, a lot of experts were skeptical. Whole Foods was struggling against some PR snafus and people wondered what Amazon really knew about how to manage a grocery store.

But look at what happened? As soon as Amazon acquired Whole Foods for $13.5 billion, Amazon’s market cap went up $14.5 billion. Essentially, the market paid Amazon to acquire Whole Foods. (If you’re curious to read more about Amazon, check out The Everything Store.) So, it’s interesting to see how the market will view M&A. It’s about risk, the ability to manage the risk, and telling the story of how this acquisition fits into your broader business strategy and culture.

Finally, we’ll leave you with some pitfalls and opportunities to consider when it comes to communications during a merger or acquisition:

M&A Pitfalls:

  • Companies that overpay: We have another blog post dedicated to this topic. Suffice to say, if you overpay for an acquisition, it can create credibility issues with your investors, your Board of Directors, your employees…the list goes on. Negotiations can get emotional quickly but consider that the business strategy will have to support the valuation.
  • Cultural fit failure: We’ve seen it happen: a small start-up firm develops an amazing technology and gets bought by a huge firm looking to prove it’s innovative and “hip.” Then, within a year, all the original start up employees are gone. Avoid this kind of cultural disconnect by having an air-tight integration strategy from the beginning. Make sure you are walking your walk, so you can deliver on what you’re promising.

M&A Opportunities:

  • Integration is key: The best M&A success stories are those where the merging leadership teams think about integration all the way along. When companies have a successful communications strategy that includes communicating the big vision well for both internal and external audiences, the proof is in the stakeholders’ response.
  • Customers see opportunities: Ideally, when two companies merge, customers say “this is exactly what I needed.” Rather than seeking out two solutions, for example, the customer gets one-stop-shopping from the new hybrid. It’s your job to help communicate this feeling across your stakeholder groups.
  • Employees see opportunities: And if you can also pull off a merger where employees in both companies see the transformation as good for their own careers, you’ve developed a winning communications strategy. Often employees of the smaller firm may feel anxious about being acquired. But if you can honestly demonstrate opportunities for career mobility, earnings potential, and other benefits of working for a larger company, it will go a long way toward easing transition tensions.

The above is only a sampling of the insights and best communications practices gained from Dan and Katy’s conversation. To watch and listen to the 30-minute interview in its entirety, hop over to GoQuantive.com.

Catch the whole episode here:

For more information about how Audacia Strategies can help you own your message through big bold business changes, check out our one-page business overview. And if you’re new to the Audacia Strategies world, welcome! Please contact us to set up a discovery session so we can start strategizing about your best communications practices now.

Photo credit

business growth

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

/0 Comments/in , , /by

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

/0 Comments/in , , , , /by

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

/0 Comments/in , , , , , /by

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

working with a communications specialist

Audacia’s Guide to Working With a Communications Specialist—Fabulous Business Transformations Begins With Smart Preparation

/0 Comments/in , , /by

You have a glimmer of a change in your mind…a transformation. Perhaps you’re considering an acquisition, a new product launch, a fundraising round, or implementing a new, game-changing internal system. You’re excited, but you’re also practical. You know big, bold moves that lead to transformation require time, energy, and money.

What can you do today to set yourself up for success down the road? You need the A-team onboard to make this work and that means you need some external expertise—lawyers, financial specialists, technology specialists, and yes, even (or dare I say, especially) communications specialists.

Business TransformationsAnd if you’re extra ready to be wildly successful, you will want to be as prepared as the professionals you’ve gathered. So, here’s everything you need to know when working with a communications specialist.

Where to begin and how to set yourself up for success?

1. Find the right consultant early in your process.

Often, finding the right external talent takes time and effort up front. But keep in mind that you don’t need to save this task until crunch time. Just as you prospect for clients, you should always be prospecting for external talent. This way, when you’re ready to make that big move, you won’t lose momentum searching for the right consultant.

Have a conversation before you think it’s time. Most consultants are more than willing to sign a non-disclosure agreement (NDA) to ensure that you can have a candid conversation about your goals and expectations without the risk of giving away anything precious (And if consultants aren’t willing to sign an NDA, you should run).

In addition, starting the conversation and integrating the team early in your planning process allows you the benefit of their expertise as you build your strategy.  Working with a communications specialist early on can help you shape your plan to be even more likely to deliver the ROI that we all seek.

2. Ask for recommendations.

Prospecting for consultants can extend to prospecting for other business partners and strategists. Who has your consultant worked with before and are they willing to speak with you? I LOVE connecting my clients. Success stories sound best coming directly from happy clients and word-of-mouth is a great way to find those hidden gems who can really propel your business forward. Plus, you never know when clients might find some business opportunity together in their conversations. So, spread the love!

3. Consider company culture.

It’s also smart to consider company culture—yours and theirs. Diversity of thought and experience is critical, but if your organizational culture and theirs are 180-degrees different, chances are that you will have a hard time communicating effectively and that will make your interactions less efficient. Look for any clues about how working with a communications specialist could support or clash with your company culture and strategize accordingly.

4. Be ready for an in-depth conversation.

A good consultant asks lots of questions and really listens to your answers so that they can provide their best counsel. As advisors, our role is to hear you and help to accomplish your Big Idea. And, a good advisor will ask a lot of follow-on questions to get to the heart of a challenge.

For working with a communications specialist to be worth your while, it’s important that you can answer your expert’s questions to the best of your ability. So, you absolutely will want to treat every conversation like you’re entering the Shark Tank. Okay, it probably won’t be that bad, but be ready to have your assumptions challenged.

Remember, you can ask questions too. Do they have examples of their work available? A blog? Do they post on LinkedIn to share their knowledge? These are good places to start getting to know your consultant.

Also, don’t be surprised if that first conversation or two results in your consultant saying, “I don’t think that our firm is right for you at this time but you should really speak with ABC Consulting because they’ll knock this out of the park. I’m happy to make an introduction.” Don’t take it personally. This is how professionals do business.

5. Be ready to talk $$$.

Yes, I’m going there. Have a budget in mind. Be ready to discuss that budget. Budget guessing games waste everyone’s time. Communicate your budget requirements and expectations upfront. With budget guidance, a consultancy will offer you a plan that will get you to your desired outcome in the most efficient way, while staying within the budget you have. It will also save you from wasting time talking to the wrong consultants.

By the way, this means more than finding the cheapest vendor. An inexperienced consultancy who is cheaper, but takes a longer time to reach your goal and requires more time to get up to speed on your company or market, may be more costly in the end. It might make better sense to hire an experienced consultant who can reach your goal more quickly, but with higher bill rates.

6. But don’t fall into the trap of thinking only about money.

On a personal note, I find that some clients spend a lot of time thinking about the finances of a transformative event, but very little time thinking about how they’re going to communicate this event to customers, shareholders, employees, etc.

It’s easy to get swept up in the new idea and believe that everyone will think it’s a great idea too. But the reality is that change is change. Not everyone is going to be onboard. So, the sooner you start to think about how to communicate this Big Idea beyond the conference room walls, the better.

7. Focus on the outcome, not the time needed to deliver it.

No, this isn’t consultant-speak for “let me charge you more.” This is straight-talk. I want you to be successful as much as you want to be successful and I really don’t want you to feel like every minute you spend talking to me will cost you money. By focusing on the business outcome, rather than on the hours, you’re holding the consulting firm accountable for the results within the timeline and the budget that you have.

8. Set realistic expectations for working together.

Working with a consulting firm is not a one-way street. Do not expect that your consultant will hit the ground running on Day One and come back to you when the project is over. The best way to get as much as possible from your advisors is through collaboration where both parties are taking an active role.

You will want to think of your consultant team as an extension of your team. Invite your consultant to be present on-site, get into the weeds with you, and get integrated within your team. That’s the only way they can get a deep understanding of the challenges you’re facing and, ultimately, identify the best solution. Without making such allowances, working with a communications specialist will be frustrating for everyone involved.

If 2019 holds a glimmer of change for your firm, make sure your team is set up for wild success. We’ve consulted on transformations from product launches to CEO transitions and everything in between. Would you like to know how working with a communications specialist could propel your work forward in New Year? Schedule a discovery session and let’s discuss!

Photo credit: primagefactory

buying an existing business

So You Want to Buy a Business? Turn Buy-Side Challenges to Your Advantage with Our Strategies

/0 Comments/in , , , /by

Buying an existing business is one of the best ways to break into a new market, acquire valuable copyrights or patents, or leverage your expertise to steer a stagnating business in the right direction. While acquiring a business typically requires more funds upfront, the risks tend to be less than starting your own business—as long as you buy smart, that is.

We teamed up with Richard Phillips of Crossroads Capital to create a webinar guiding the smaller financial buyer eying the middle market. We’ve included the link to the full 60-minute webinar at the end of this article. Here we specifically address two key insights about buying an existing business: buy-side challenges to consider and how to develop a communications approach that turns those challenges to your advantage. So, let’s get to it!

Buy-Side Challenges Facing Smaller Financial Buyers

Because the mid-market M&A environment is highly competitive, if you are a smaller financial buyer looking at buying an existing business, you are unlikely to be able to compete on price alone. Bigger, strategic buyers will be in a position to offer better deal terms and be able to outbid you in most cases. This means you need to get clear about who you are and what you offer AND you need to be creative in coming up with a strong target list, developing your relationships, and negotiating deals.

First, keep in mind that opportunities to buy are not limited to brokers’ lists or small business auctions. In fact, investment bankers, who advise smaller commercial buyers recommend looking closely at not-for-sale companies. While it is tougher to find business owners who are willing to sell here, when you do find one, it can be easier to close a deal.

One key advantage you have over bigger buyers is flexibility, so use it. Your flexibility may allow you to shape a deal that’s more attractive to the seller. Consider that small business owners willing to sell often have concerns beyond price. An owner who has built her business from the ground up over the past 40 years may prefer an agreement that includes provisions for her continued involvement as a consultant or a guarantee that loyal employees will be protected. Bigger buyers often can’t or won’t make such promises.

Because many owners of middle market businesses care as much (or more) about non-financial concerns as they do about the money, it’s important to think about the transaction from the seller’s perspective. This may be challenging since, as a buyer, you will be primarily focused on the business valuation and financials. But this broader focus will pay dividends in the long run.

As you begin discussions, keep the following likely differences in mind:

  • Personal: Business owners are often at a different stage in life than buyers and have different motivations. This makes sense if you think about when an owner might be in a position to sell, e.g., when she’s ready to retire. Also, according to recent reports, America’s business owners tend to be older (50% over 55). There may be important generational differences between you and the seller.
  • Cultural: While you may be a numbers person, keep in mind that your seller is likely not tracking KPI’s or sweating over spreadsheets. Most business owners in this environment are independent-minded and focused on qualitative measures. Many entrepreneurs build their businesses by making smart short-term decisions and keeping their noses to the grindstone, rather than thinking about their exit strategy. Sweat equity may be all they know.
  • Situational: Above all else, remember that while this may be one deal among many for you, this business owner will likely sell only once. Be respectful of this mindset difference and realize that if the seller expresses “sellers’ remorse,” resistance, or reluctance, he’s probably not trying to be a jerk—he’s trying to get things right. It can also help to keep in mind that you’re both doing something you’ve never done before. You’ve never bought this business and he’s never sold this business.

Overall, if you approach discussions with the owner of a not-for-sale business with an attitude of respect and a willingness to be flexible on the terms of a deal, you both stand to gain. Now let’s get specific about what your approach should look like.

Key Ingredients in Your Communications Approach

Keeping the above challenges in mind, it’s clear that if you approach a potential seller with complicated spreadsheets and graphs, you’re likely to be met with polite stares, if not a quick invitation to show yourself out. This is not to say the numbers aren’t important to a seller, but buying an existing business is all about how you present the rationale behind the numbers, not to mention yourself and your qualifications as a buyer.

Ask yourself: What’s my differentiator?

Although you want to buy this business, your approach should come from more of a seller’s mindset. Your goal should be to articulate your value and sell your organization to the owner. Above all, gain rapport by listening to the seller, figuring out what she needs most to be comfortable selling, and then being willing to adapt to those needs. The bottom line is you have to build credibility with the business owner or you don’t have a deal. Period.

Key ingredients in your winning pitch:

1. Articulate your organization’s value. Be ready to talk about your mission and how buying an existing business fits into the broader vision you have for your organization. Bonus points for connecting this with the seller’s values.

2. Come up with a seller-focused message. Paint a clear picture that explains why this particular business, what your aspirations are for the future, and how you are uniquely positioned to usher this business into that bright future. This message needs to be authentic. If you simply say what you think the seller wants to hear, without buying in yourself, the owner will see right through you.

3. Emphasize how you stand apart from other potential buyers. It’s not unheard of in a competitive environment, such as the mid-market, for there to be 10 other buyers offering all-cash deals. It’s imperative for you to talk about how you and your team could be an asset to the company you want to buy. Talk about the unique strengths can bring that help them achieve their vision for the business.

Again, go beyond the numbers and consider the owner’s mindset. She is considering turning over her company, which is more like her baby, to a complete stranger. You would have reservations too. Help her see past those reservations through your message.

Remember: This is Personal

Finally, as you consider how to set yourself apart from other buyers, know that making the personal connection and gaining the seller’s trust can absolutely determine who wins the sale in the end. You’ve probably heard stories about home buyers in competitive markets writing heartfelt, handwritten notes to sellers and getting the house because of the letter. The same strategy can work in buying an existing business.

But before you pull out the stationary, it’s crucial to locate the point of overlapping values early on and expand on those points of relevance throughout the process. Describe your respect for the seller’s legacy and her motivations, talk about your investment plan and growth strategies, and discuss your philosophy on performance-aligned compensation. In other words, appeal to the owner’s beliefs about what it takes to successfully run this business.

There’s no doubt smaller buyers face several challenges in buying an existing business. But the right communications approach can turn those challenges into a winning strategy. If you remain open to opportunities to show that your aspirations align with the owner’s aspirations and that you can be creative with your deal structure, you can succeed in the mid-market M&A environment.

Once you’ve decided buying an existing business is your next move, it’s time to find the right advisors to guide you through the 16-18 month process. At Audacia Strategies, we’re here to support you before, during, and after your acquisition. We live for strategy!

For additional insights on this hot topic, follow this link to hear Katy and Richard’s full webinar: Succeeding as a Small Financial Buyer in Mid-Market M&A.

Photo credit: Wavebreak Media Ltd

influencing business valuation

Could Your Business Be the Next Apple or Amazon? 5 Key Factors Influencing Business Valuation (Part 2 in our series on Business Valuation)

/0 Comments/in , , /by

This is the second part of our series on business valuation. Before you dive in here on influencing business valuation, make sure to check out part one where we dig deep into types of valuation.

In our previous post, we discussed some of the complications involved in determining the value of publicly traded and privately owned businesses. And we want to emphasize that while from the outside it can seem like big corporations are dealing in Monopoly money—business valuation is not (completely) based on concrete, objective measures—strategic investors and private equity buyers do follow some standard assessment practices.

Still, business valuation remains a contentious issue and as a result, many potential sellers approach negotiations with assumptions, rather than knowledge about specific value drivers supporting a realistic assessment of their business’s worth. Since assuming is always inferior to knowing, especially during the negotiation process, it’s worth considering internal and external factors influencing business valuation.

Whether you’re thinking about selling your business in the near future, interested in keeping value drivers on your radar as you grow your business, or looking to get into the investment game yourself, there are key factors influencing business valuation to keep in mind. In addition, CEO Katy Herr will be speaking with our friends at Quantive to get their expert perspective on this timely topic. Check back for a link to the podcast where Katy and the Quantive team will dig deeper into influencing business valuation and transferring value in M&A. In the meantime, here’s a primer.

A Quick Recap

Before we look at the specifics influencing business valuation, let’s remember why this is an important question to ask. Recall that there are a couple ways to assess the value of a publicly traded company:

1. Market Capitalization (cost of a company in “real money”):

  • Market cap = stock price x number of outstanding shares

Following Apple’s ascent into 13-digit territory last month, Amazon’s total market value surpassed $1 trillion last week. Both of these valuations are based on the simple formula above.

2. Enterprise Value (cost to acquire a company):

  • Enterprise value = a corporation’s market cap + preferred stock + outstanding debt – cash (and cash equivalents) found on the balance sheet

This is the formula a buyer might use to determine what would be a fair offer to acquire a publicly traded company.

Now, investors don’t use these formulas when looking at the opportunity or degree of risk involved in acquiring privately held companies simply because they don’t usually have access to this information. Private companies aren’t required to report earnings, stock or share prices, outstanding debt, or cash in the bank. However, as a business owner, you do have access to this information and you could provide it to interested investors or buyers. In fact, strategically releasing this information will likely give you a leg up on influencing business valuation.

What’s really important to understand for our purposes is both types of business valuation, but especially market cap, rely on expectations. So let’s talk about factors influencing business valuation.

Buyers look at the following factors when deciding which valuation multiple to apply to their assessment of your business’s ability to generate income and cash flow. Here is what you can do to put yourself in the best possible bargaining position:

1. Maintain Clean Records

If you aren’t doing this for your own peace of mind and other business benefits, it’s crucial for you to get your books and records in order well (years, ideally) before you start looking for investors or buyers. At a minimum, you will want to keep personal and business expenses separate. Having professionally managed books and a solid financial audit is a smart investment if you are seriously hoping to sell one day. This will also help you understand where you are today so you can target your growth goals and mitigate business risks influencing business valuation. So, do your homework here.

Keeping clean records is the first step toward running a profitable business. But records means more than financials. Make sure all important documentation is well-organized and would make sense to interested parties outside of your inner circle.

Important documentation includes:

  • Financials (balance sheets, expenses, tax returns, credit card statements, bank statements)
  • Audits, regulations, and licensing records
  • Recent legal due diligence reviews
  • Written systems and processes, including employee handbooks and manuals
  • Key employee agreements and noncompetes
  • Customer records
  • Written and assignable customer agreements
  • Written contingency plans for emergencies and other potential disruptions to cash flow
  • Key equipment maintenance records

2. Highlight Positive Trends

Investors want to know when they can hope to see a return on their investment, of course. This means showing a projection of positive, predictable profits is ideal. But if your business is new, this might not be a realistic benchmark.

Typically, analysts and investors will look at the most recent 3-5 years of past performance and 2-3 years of projections in determining value. Be sure to point to factors within your control, such as personnel management and smart cost-cutting maneuvers, as well as external factors, such as industry dips and seasonal declines, to tell a complete story.

It’s also crucial to point out other positive trends influencing business valuation that make your business attractive:

  • Revenue growth rate
  • Consistent gross margins trending upward
  • Higher than average industry operating margins
  • History of achieving financial projections
  • Strong, sustainable, predictable cash flow
  • Consistent history of profitability
  • Solid pipeline of new business and demonstrated ability to convert

3. Be Open to Change

One of the big external factors to consider is how the business will respond to inevitable market adjustments and changes in the industry. With technology and automation bringing about rapid changes in most industries, businesses that show an ability to evolve are most likely to maximize profits and sustain additional growth while keeping operational expenses low.

For companies involved in the production of a product, evaluating your strengths and weaknesses is crucial. Can you increase efficiency, product quality, profitability, or customer satisfaction by outsourcing certain aspects of your supply chain? Should you seek out strategic partners in particular areas?

4. Make the Business Less Reliant on Key Personnel

What would happen if the CEO decided to retire, seek out another career opportunity, or take an extended vacation? If your answer is that the company would not skip a beat, then you are on the right track. Companies that rely on owners who spend a lot of time working “in” the business are susceptible to lower valuations. By contrast, those who can set up reliable processes and trusted management to serve clients can walk away leaving a new individual to run the business.

Bob Moskal at Quantive shared this example:

We worked with a facilities maintenance company to recommend and implement a host of improvements to make their business transferable. For example, we recommended they digitize their record keeping, make their financials useful for running the business not just for tax returns, and transition customer accounts to account managers so that a potential new owner could see that the company could run with the same level of success without the departing owner. Previously, this business would have been heavily discounted or not sold at all. It’s now positioned for growth and a more attractive acquisition target.  

Additionally, the following factors make a business easier for a buyer to take over and manage successfully:

  • A strong, recognizable brand identity
  • For product-centric businesses: a clear supply chain; equipment upgrades to modern, productive equipment; systems in place for identifying and implementing new technology
  • For service-centric businesses: system protocols that have been tested; an established, clear succession chain; well-documented job descriptions and processes for sharing institutional knowledge

5. Be Able to Show Large Market Potential

In one sense, how a business has performed in the past matters less to investors than the potential for future growth. Past performance is only as good as what it tells us about future projections. Many buyers focus on turning around businesses in industries where they have been successful in the past or businesses where they have key contacts who could help increase future profitability.

Because so much depends upon the expectations of individual investors, it pays to focus on factors that will likely influence the market potential:

  • Multiple, strong sales distribution channels
  • Multiple revenue streams
  • A strong industry market share
  • A written and up-to-date business plan
  • Proprietary products or technology

Because all of the above five factors influencing business valuation depend on expectations, the best you can do as a seller is lay your cards on the table in a way that puts your company in the best light. This means putting yourself in the shoes of your investors and considering carefully what would make this offer most attractive.

Finally, if you’re really hoping to get top dollar for your business when you are ready to sell, experts say it’s all about doing the pre-sale prep. Again, according to Bob Moskal, business owners will want to start with due diligence a couple years ahead of time, so they have plenty of time to take steps to correct any “skeletons in the closet” ahead of negotiating a sale.

Also, Bob recommends knowing what your company is worth before starting the process, “we’ve often seen a seller shy away when he starts actual retirement planning late in the game and realizes the value falls short. A good financial planner can help here.” You can hear more of Katy’s conversation with Bob about influencing business valuation when they sit down to record a podcast later this month. We’ll add the link when it’s available. Stay tuned!

At Audacia Strategies, we specialize in putting together communications strategies that helps our clients meet their goals. We’ll be the voice of reason as you figure out how to highlight the key value drivers and tell the story of your current (and future!) success. Our team is all about managing expectations. Contact us to schedule a consultation.

Photo credit: rawpixel

murder board

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

/2 Comments/in , , /by

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

building an IR program

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

/0 Comments/in , /by

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

corporate communications

In Corporate Communications, Timing is Everything

/2 Comments/in , , , /by

You might be surprised to hear that corporate communications and standup comedy have something in common—timing is key. Whether you are announcing a corporate merger or delivering a killer punchline, if your timing is off, your message will fall flat.

When corporations have a big announcement to make, a lot of time and energy goes into figuring out precisely how to state the message. What should the press release say or what language should the CEO use when discussing changes with investors?

While it’s certainly important to get the messaging right, keep in mind too that good corporate communication has less to do with what you say, than how you say it.

Let’s consider some important questions to ask when dropping big announcements.

 1. Is your announcement subject to regulatory restrictions?

First, you must consider the federal regulatory rules of your industry. There are most likely rules regarding what you can communicate, to whom, when, and how. So make sure you brush up on the SEC disclosure requirements and corporate communications law relevant to your industry.

Example: Material Announcements

Speaking of regulatory restrictions, Regulation Fair Disclosure (Reg FD) requires all publicly traded companies to release material information to all investors at the same time.

This hasn’t always been the case. In the 1990’s, financial services companies routinely held conference calls with market analysts and some institutional investors giving them in-depth information about the company. Recognizing that this gave institutional investors an unfair advantage over individual investors, the SEC ratified Regulation Fair Disclosure (Reg FD) in 1999.

As a result, companies are required to simultaneously make material announcements to all shareholders. Ideally, leadership would communicate the changes during a scheduled conference call with investors or town hall meeting.

However, if word of a material event or material information is inadvertently leaked to some investors or analysts (i.e., an “unintentional selective disclosure”), as soon as a senior company official learns of the disclosure, she is required to disclose the information publicly. Companies must make the announcement either (a) within 24 hours or (b) by the start of the next day’s trading on the New York Stock Exchange.

2. What are your competitors doing?

How much of a splash your announcement makes, at least partially depends on the behavior of your competition. If you have good news to share, you want to capture as much attention as possible. With bad news, you want to be as transparent and complete as possible in your initial communications to avoid continually referencing the issue and detracting from your broader corporate strategy.

Example: Product Launch

Let’s say you are ready to roll out a new product that will take your industry by storm. Sure, you are excited about the product. But if you rush to make the announcement without a strategy, you risk being overshadowed.

For example, if you know your competition always releases new products on the Tuesday before Christmas, it might seem that you could steal their thunder by announcing on the same day. But you also risk having to share the spotlight with a close competitor. And unless you are confident that your corporate communications team can outshine your competitor, it’s probably best to steer clear of this kind of shouting match.

While there’s no crystal ball to predict what opportunities are on the horizon, waiting a bit before releasing big news can pay off.

3. Does your corporate communications policy respect your staff?

Some announcements affect your internal staff more than shareholders or the general public. For instance, corporate reorganization could mean layoffs for staff members, while individual shareholders see a moderate increase in their returns.

Example: Corporate Restructuring

When making an announcement like a corporate restructuring, it’s important not to take your staff for granted. Relationships internal to your company are as important, or even more important, than external partnerships.

So, put as much thought into announcing corporate restructuring as you would into announcing a corporate acquisition. Just as you wouldn’t want investors to hear through the grapevine about a planned restructuring, you wouldn’t want your staff to hear about potential layoffs on the news.

As with any external message, be mindful of how your internal announcement will affect your audience. Don’t let emotions get in the way. If you are the head of a division, the corporate restructuring might be bad news for you as well. But when you make the announcement to your team, be considerate of their feelings in hearing the news for the first time.

Having the right overall strategy for timing corporate communications takes a blend of planning, finding the right words, and practicing authentic human engagement. At Audacia Strategies, we don’t do standup comedy, but we have helped many companies like yours find the right timing strategy for big announcements. Schedule a Free consultation to discuss your specific needs.

Photo credit: progressman / 123RF Stock Photo