As we look towards a new year and a fresh start, we are also thinking of how to start the year right with messaging. Here are a few tips to keep in mind and practice when communicating with Wall Street:
Be forthright. Build credibility with investors by being forthright and open about both sides of your company’s story. Every company has opportunities and risks to its business model. Investors and analysts are paid to understand them and to make judgements about associated risks and reward; and management teams that are forthright and open generate credibility with investors that may earn them the benefit of the doubt during times of uncertainty.
Be consistent. Assume that investors have perfect memories and will notice if your messaging changes. Be prepared for follow up and probing questions even if the changes are subtle or minute. Better still, acknowledge that there has been a shift and explain it proactively.
Be transparent. Let investors see what is on your dashboard. Communicate goals, the steps that you are taking to accomplish them and the progress that you are making. This is particularly useful as the company moves through time and provides natural talking points with investors who are following the corporate journey – either as shareholders or potential shareholders.
Make sure that everyone is reading from the same sheet music. Messaging should be consistent across every outward-facing member of management. This will help to avoid confusion, and confusion can morph into controversy quickly.
Guide conservatively. Set the bar at your ankles. When discussing corporate deliverables and timelines, leave a healthy margin for error. Make promises only about things in which you have very high confidence achieving and for which you want to be held accountable.
Avoid putting yourself at risk of over-promising and under-delivering. Every company has variables that it can control and those that it can’t. When speaking with The Street, articulate which parts of the business plan you control, and which parts you don’t. Discuss activities that are being undertaken to maximize potential for success and mitigate risk of failure and acknowledge those things that are out of the company’s control.
Sins of Commission. Avoid intentionally misleading The Street about the business, important developments or changes. These are unforgivable in the eyes of the investment community and will discredit management in perpetuity.
Sins of Omission. The failure to answer questions directly or to use semantic nuances to avoid addressing a potential risk. These can lead investors to think that management is slippery or is disingenuous. Credibility that is lost in an instant can take years to be re-gained.
Answer questions directly. Give the punch line up front and then provide background and evidence to support your response. The longer it takes to answer a question, the higher the risk that the audience will get confused, lose interest or stop listening.
Get buy-in. After responding to a question, ask the person who posed it if your answer was clear and complete before moving on to the next topic.
Don’t write off investors and analysts. Be patient. Just because someone doesn’t buy the story today does not mean he or she won’t at some point in the future. Companies evolve and so do investors’ opinions. Some investors need to see a company many times before pulling the trigger.
Keep your friends close and your enemies closer. If you know someone is negative on the company or is short the stock, don’t just shut him or her off. Try to identify the reasons and educate him. Salesmanship begins when the prospect says “no.”
Stay visible. When reporting mixed news, maintain a dialog with both analysts and investors. Both constituencies want reassurance from management that you recognize the issues and have a plan.
Update metrics. As a company matures, the operating metrics provided to The Street need to evolve to illustrate the health of the business and to allow the investment community to gauge the company’s progress.
Anecdotes aren’t data. Companies running clinical trials or doing feasibility studies often get excited about early responses or potential new indications and are eager to share individual patient examples. Once communicated, they can set up unrealistic expectations that can undercut future credibility. Once trials are complete and data are available, it can be helpful to provide patient examples to illustrate real-life clinical benefits.
Read Reg FD and keep it in the fairway. There is a difference between providing incremental insight and providing incremental facts. When meeting with The Street, the goal is to help your audience to garner a greater understanding of your business (and your equity story) without offering undisclosed material information. Institutional investors meet with management teams to evaluate a potential investment. They do not want to be put at risk by receiving information that crosses the line. If there are changes, put them in the public domain.