Investor Relations Should Not Be Scary
Investors just want you to have a plan.
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Most businesses have investors, so if you’re most business leaders your job involves managing your investor relationships. If you’ve never done it before, investor relations can seem like a black art where the rules and expectations are unclear. That’s mostly true! Investors come in many types and have their own personalities, motivations and goals.
Investors, like everyone else, are complicated.
As a result, most leaders do a poor job of investor relations. Investors are seen as a shadowy tribunal that will pass judgment on the company overall and you in particular. Afraid of this judgment, investor relations become a constant attempt to win favor from the investors. This is a mistake.
Your investors are part of your business. Unless you are their first and only investment, they know that businesses go up and down. Investors are people, just like you, and while they want you to produce a return on their investment they also want to know you are doing whatever you can to get there.
The expectations of most investors are very simple. Your investors want:
A credible plan for the business that you, as a leader, believe strongly in.
That’s it. That’s what they want. It sounds simple, but let’s break it apart to see what it takes to give that to them.
Part 1: Have a Plan
Regardless of whether your company is doing well or poorly, your job as a leader is to produce a return on investment. That return comes from making the business more valuable by growing it in valuable ways. If the business is doing well it is probably easier than if it’s going poorly, but that is your job either way.
You need to have a plan for how to produce that growth. Having a plan does not mean you have a guaranteed way to produce the growth, all plans involve some amount of risk. The important thing is that you have a plan.
That sounds simple, but what do you do if your current plan is not working? You do not abandon that plan with a promise you’ll come up with a new plan. At all times you need an active plan, so you continue with the existing plan with a commitment to provide a new plan in a short period of time.
You also need to communicate your plan, early and often. No investor should ever wonder if you have a plan and what it might be, you should communicate it clearly and repeatedly so that it’s fully absorbed. This can seem silly since you live with your plan every day, but remember your investors likely only think about your business a few times a year! To them it won’t seem silly.
The amount of detail and rigor in your plan will vary based on the type and size of business, but the plan should be specific enough to understand how you believe growth will be achieved.
Part 2: Have a Credible Plan
Just having a plan is not enough! Lots of people create plans that will never work. Why will your plan work? You don’t need a 100% guarantee but you do need reasons to be confident in it.
If your business is doing well and you are going to keep doing more of the same, that might be enough. However, few businesses are doing so well they don’t need to change anything. Whatever you are changing is a risk and you need clear reasons why these risks are worth it and will likely pay off.
For example, if you are expanding your product suite why do you think customers will buy the new products? Do you have early purchase orders? Did you do deep market research? Whatever you have should make it clear the risk is not a gamble but an educated bet.
All parts of your plan need to be credible, so you’ll need a variety of supporting evidence. Sometimes it will be your personal experience as a leader, sometimes it will be data and sometimes it will be larger market forces. Whatever they are, they are part of the plan because they make the plan credible.
Part 3: Believe in Your Plan
Even a credible plan is not enough! There are many very credible plans that will not work because the leadership is not excited about executing them. Leadership requires energy and passion and if you have neither then the plan is irrelevant.
Believing in your plan does not mean putting on a happy face when you talk about it with investors. You need to be excited about your plan, especially the potential of achieving the goals it lays out. If you really are excited, you won’t need to convince people.
Since you won’t be excited about every possible plan, you should choose credible plans that excite you. There are always many different paths to the same goal, so lean into your passion and choose the credible plan that works for you.
All of this is true for investors in private companies, where there is not a liquid market to buy and share equity. Public companies need to have a very different relationship with their investors because their investors can sell at any time, there is no long term alignment of incentives.
But as long as you’re leading private companies, this is what it takes to be great at investor relations. Always have a credible plan that you believe in.
It sounds simple, but sometimes the simplest things are the hardest.
For more on managing your investors and board members, see:
Investors Buy Tomorrow, Not Today so that’s what you should sell.
Don’t hide the truth, share the Great, Good, Bay & Ugly
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i want fresh fruit at board meetings too sean