The first rule of medicine is to do no harm. That should also be the first rule of financial communications.
Too often IR firms eager to impress a prospective client will lay out an investor strategy that goes way beyond what is appropriate, especially for small to midsize publicly traded companies. This overstep makes it both difficult to implement an effective plan and leaves a sour taste in the mouth of the client's senior management.
Having sat on both sides of the table, I have heard pitches that were impressive, but completely wrong for the client. Disconnects between a pitch and a client's needs make agreeing to any plan or even doing business more complicated. Over time, and with some painful experiences, I have collected a few rules of engagement:
Get buy in. Make sure senior management is genuinely committed to not only spending the money, but, more importantly, to making the time necessary for a successful proactive IR program. An effective IR program could take up to a year before gaining significant traction. That often means spending at least two days on the road meeting with current and prospective investors.
Abide by management's market philosophy. Senior management sees value in getting on the road. Some senior managers simply believe that the stock price will take care of itself and that their energy should be strictly focused on running the company. That presupposes that the market is efficient and the share price accurately reflects everything an investor should know about the company. If this is what senior management believes, then leave the IR program alone.
Say something new. Why should anything change if what you're saying is the same old thing, perhaps slightly repackaged? This will actually hurt you, as it won't win over any new investors and could also damage your credibility.
Practice makes perfect. The presentation should go beyond the numbers to explain your company's competitive advantage. Investors want to know that even if your business has thrived for more than 100 years, you are always fighting for the edge - quality, price, or service. They want to know that you are as hungry today as the day you joined the company.
Easy on the PowerPoint. An effective presentation is generally a story. It has a cohesive beginning, middle, and end. If you lose your audience because of complicated charts or convoluted storytelling, they'll tune out. A good presentation is about 15 to 20 minutes, leaving ample time for questions and conversation.
Skin in the game. Investors are comforted when they know senior managers have chips in the pot. They appreciate that senior managers believe enough in your company's future to take a financial risk.
While regulatory rules, such as Reg FD, have required more discipline and vigilance, it has neither eliminated the possibility nor the importance of meeting with prospects and investors. Good investor meetings seek to go beyond the numbers - which are readily available - to help investors understand why they should share your excitement
for your company.
Fred Bratman is president of Hyde Park Financial Communications.