Have you ever told your kids something, only for them to "forget" and ask the very same question again the next day?
We all have.
So why do companies consistently think that investors are any different from their kids? They're not. They're just bigger and richer.
Investors need to be reminded of a company's "story" over and over for it to resonate and for the Street to get aligned around that story. This takes consistency and repetition and reminding investors what you told them the before and updating them on progress towards achieving what you told them you'd do.
Except that the if I had a dollar for every time I saw a company change their story or fail to simply create a story for the year and in a very boring (but incredibly helpful) way, update the Street on their progress towards achieving the milestones in their story, I'd be so rich that I wouldn't be writing this blog and helping companies with their investor relations activities.
Sadly, nobody gave me a dollar for each time that happened… so here I am sharing my wisdom with you.
It doesn't really matter how complicated your company's story is… you have to boil it down into the top 3 or 4 things that create value and talk about those incessantly. What are going to be the key drivers of growth? Or of margin expansion? Or of cash flow? Those are really the only three things that matter. Because in the end, these are the three things that will drive earnings growth, and despite the fact that I think stocks have emotions that affect stock prices, what investors are really after is understanding what the "out year numbers" will look like.
So maybe you have 50 or 100 different product lines… and maybe your "widget" is very hard to explain… or maybe you've got so many vectors of growth you can't narrow them down… or maybe you've got some type of "transition" happening in the business.
It doesn't matter. Whatever it is… you have to hold investors' attention long enough for them to be willing to "do the work" on your story. And investors are busy… they're often following 50, 100, or even more companies. They're often super-smart, but they're also distracted. So you have to tell them the top 3 or 4 things that are super-relevant to driving earnings growth and repeat those things over and over again.
My recommendation is that IR departments or their investor relations consultants should be writing earnings scripts that:
- At the start of the fiscal year, lay out what the company hopes to achieve. Lay the foundation for achieving 3 or 4 key things. 5 is too many. 6 is distracting. 7 is overkill and by 8 “key topics,” nobody is listening.
- At each subsequent earnings call during the year, remind investors what those 3 or 4 key things are and discuss the company's progress towards achieving those milestones. Think of it as a quarterly report card.
- At every investor conference, focus exclusively on these 3 or 4 things and talk about why they're important in driving earnings growth. You’ll feel like you’re repeating yourself and you’ll get sick of listening to yourself. But remember that not all investors have access to the same brokers. So your message is rarely distributed to everyone… you’ve got to repeat it over and over for it to have the desired effect of reaching everyone.
- At the completion of the year, remind people what you told them at the start of the year and provide them with a scorecard of how you did against those milestones.
My recommendation further is that IR departments or their investor relations consultants decidedly counsel companies against:
- talking about multiple different things
- changing the story
- consistently chasing the next "shiny new thing"
Consistency is key. If you want people to remember your story, it needs to be clear, crisp, and concise. Repetition is key. Remember, that as a corporate officer, you are living and breathing this company all-day, every-day. Investors on the other hand, are putting in the requisite work to understand the story, but they're also splitting their time among many other companies. So what feels like "annoyingly repetitive" to you, is probably "refreshingly simple" to your investors.