Introduction
Investor relations consulting is an important aspect of managing a public company's communication with its investors and stakeholders. But when it comes to choosing a consultant, there are two different types - strategic IR consultants and outsourced IR consultants. In this article, we will discuss the differences between the two types and their benefits for public companies.
What are Strategic IR Consultants?
Strategic IR consultants are consultants who work closely with the company's management team to develop and execute an investor relations strategy. They take a holistic approach to financial communication and work to align the company's messaging with its strategic goals. They tend to get involved when a company has a strong existing IR function, but when there are areas to improve the company’s messaging to investors. They offer services such as:
· Analyzing company financials
· Developing the proper story to tell investors
· Coming up with the proper key performance indicators (KPIs) to support the company’s story
· Scripting earnings calls
· Preparing management for Q&A
· Shareholder analysis and activism defense
· Capital markets advisory
· Crisis management
The top strategic IR consultants are typically former investors…and in some cases are former sell-side analysts. These two disciplines tend to prepare these consultants for the rigor of the job and give them the experience dealing with financial models and investors in a way that career IR professionals or people with communications degrees cannot. Strategic IR consultants typically work on a retainer-plus-success-fee basis and are often involved in the company's strategic decision-making process by advising them on the IR implications of the decisions they make. They have a deep understanding of the company's industry, competitive landscape, and regulatory environment. They also have a strong network of contacts within the investment community, which they leverage to gain honest and clear feedback that they can then use to properly craft their strategies for their clients.
What are Outsourced IR Consultants?
Outsourced IR consultants, on the other hand, are consultants who provide specialized IR services on an as-needed basis. They tend to be involved when a company either doesn’t have a dedicated IR function, or when their IR function is relatively immature. These services may include:
· Investor targeting and outreach
· Setting up meetings
· Publishing press releases
· Updating the IR section of the company’s website
· Shareholder analysis and engagement
· Conference preparation and support
Outsourced IR consultants are often engaged by smaller companies that may not have a dedicated investor relations team or the resources to hire a full-time consultant. They typically work on a project basis and are paid on an hourly or fixed-fee basis.
Benefits of Strategic IR Consultants
Strategic IR consultants offer several benefits for public companies. These include:
1. An understanding of the company’s investors and how they make decisions
2. A deep understanding of the company's industry, competitive landscape, and regulatory environment
3. A proactive approach to financial analysis and communications
4. A strong network of contacts within the investment community
5. A holistic approach to financial communication that aligns with the company's strategic goals
Benefits of Outsourced IR Consultants
Outsourced IR consultants also offer several benefits for public companies. These include:
1. Flexibility and scalability to meet the company's changing needs
2. Time saving for the company’s C-suite
3. A cost-effective solution for companies that cannot afford a full-time IR department
4. Access to a wide network of contacts within the investment community
Two Different Types of IR Consultants – Final Thoughts
When it comes to investor relations consulting, public companies have two main options - strategic IR consultants and outsourced IR consultants. Strategic IR consultants take a holistic approach to financial communication and work closely with the company's management team to align messaging with strategic goals. Outsourced IR consultants, on the other hand, provide specialized services on an as-needed basis, often for smaller companies without a dedicated investor relations team. Both types offer unique benefits and can help public companies improve financial communication, enhance shareholder value, and manage crises effectively. Understanding the differences between the two types can help companies make an informed decision about which type is the best fit for their needs.
Frequently Asked Questions
Q: Can a company hire both strategic IR consultants and outsourced IR consultants?
A: Yes, they can, but generally they need one or the other, but not both. That said, a company can choose to hire both types of consultants. Strategic IR consultants provide a holistic approach to financial communication and can help align the company's messaging with its strategic goals. Outsourced IR consultants, on the other hand, can provide specialized services on an as-needed basis, such as investor targeting and outreach. By working with both types of consultants, a company can benefit from a range of services and expertise if their budgets allow.
Q: What is the cost difference between strategic IR consultants and outsourced IR consultants?
A: The cost difference between strategic IR consultants and outsourced IR consultants can vary widely depending on the services provided and the consultant's experience. Strategic IR consultants typically work on a retainer-plus-success-fee basis and are generally meaningfully more expensive than outsourced IR consultants. Outsourced IR consultants, on the other hand, work on a project basis and may be more cost-effective than hiring a full-time investor relations team.
Q: How do I choose the right type of consultant for my company?
A: When choosing between strategic IR consultants and outsourced IR consultants, it's important to consider your company's needs, goals, and resources. Strategic IR consultants offer a more comprehensive approach to financial communication and may be a good fit for larger companies with complex needs. Outsourced IR consultants, on the other hand, offer specialized services on an as-needed basis and may be a good fit for smaller companies with limited resources.
Q: How do I ensure that the consultant I choose is a good fit for my company?
A: When choosing a consultant, it's important to consider their experience, expertise, and approach to working with clients. Ask for references and check them thoroughly to ensure that the consultant has a track record of delivering results and positive client feedback. Choose a consultant that has a collaborative and proactive approach to their work, and whose values align with those of your company.
Q: How can investor relations consulting benefit my company?
A: Investor relations consulting can benefit public companies in several ways, including improving financial communication, enhancing shareholder value, targeting the right investors, managing crises effectively, and making better strategic decisions. By partnering with an experienced and knowledgeable consultant, public companies can leverage their expertise and industry knowledge to achieve their goals and succeed in the competitive world of public companies.
