Investor relations, or the communication of vital corporate and/or financial information to a company’s investors, used to be a function reserved for publicly-traded companies.
All that changed over the last couple decades as small and medium-sized companies began moving away from traditional banks for capital and embraced alternative funding sources, who needed to be kept in the know just as much as the investor in a public company’s stock.
Whether a public company, a small organization or an entrepreneur taking the steps to incorporate their business, the goal of an effective investor relations (IR) exercise remains the same: heighten a company’s overall valuation in the minds of the investors.
Among the many IR tools that a company has at its disposal include news releases, conference calls, Webcasts, fact sheets, annual reports and meetings, presentations, media relations, IR websites and even social media channels.
While all of these may not be applicable for the small business, there is one overriding theme that does apply – communicate information early to investors, even prior to it being released to the media. This open dialogue can prove extremely valuable to a business owner, even if they are only beginning to incorporate a small business.
“Investors don’t like to be surprised,” said Peter J. Burns III of B3 Funding Partners. “The best way to maintain goodwill with them is to communicate early and often. After all, you may need to go back to them for another round of funding.”
Burns also recommends small businesses may not appreciate the help a team of investors can provide, which is another reason for a proactive IR campaign.
“The entrepreneur or business development executive, if the company is big enough, should be in constant dialogue with the investors, who are willing to open doors and facilitate strategic relationships for the company,” he said.
In our experience, we have found an effective IR program will lead to:
• Reduced volatility;
• Expanded liquidity; and
• Lowered cost of capital.
Regardless of if the IR program is modest and informal, business owners should consider creating an IR program that regularly communicates with investors as well as develops and strengthens the relationships that can support the company’s short-term and long-term growth. If started prior or at the same time of incorporation filing, owners will be able to build valuable connections that can result in a stronger foundation and company vision.