Investor Relations (IR) is a critical function for any company that seeks to raise capital, establish credibility, and maintain positive relationships with stakeholders. For small and mid-sized companies, building an effective IR strategy should be as relevant as it is for larger companies, but it can be challenging due to limited resources, lack of expertise and perhaps most importantly lack of investor and analyst interest in small caps. Here are six pointers that we expect are helpful to build and improve strong relationships with investors:
- Develop a Plan
You should consider the company’s industry, size, key stakeholders, and growth plan.
- Develop a list of priorities.
- Assess your strengths and weaknesses. Determine which areas might require outsourcing.
- Define time frames for your priorities.
- Determine the resources and budget required.
- Define KPIs and monitor them closely.
- Transparency and Communication
Regular communication is key to building positive relationships with investors. Smaller companies can establish trust by hosting regular conference calls, webcasts, and meetings to share important business developments, financial results, and future expectations. Investors value transparency and want to stay informed about any changes that could impact the business. Demonstrate your commitment to openness and build a foundation of trust. To avoid surprises, try to release material news at the same time of day and stick to consistent earnings reporting dates each quarter.
- Investor targeting / leverage big caps
Proactivity is key when it comes to investor relations for smaller companies. By actively seeking out new investors and nurturing existing relationships, small companies can attract investment, drive liquidity, and increase valuation. To do this effectively, it is essential to understand the composition and investment objectives of your company’s shareholders. This information can help tailor your investor relations strategy to meet the specific needs and interests of your target audience. You can also leverage off big caps in the same sector – investors will often follow you to understand the larger peers, but then may become shareholders.
- Digital IR
Using digital platforms and tools, such as email marketing, social media, and webcasting, you can reach a wider audience with timely and relevant information. A modern and information-rich website, with an easy-to-navigate IR section, can also help engage stakeholders.
- Risk Management
Effective IR involves managing risks that could impact the business. To do this, smaller companies should create a risk management framework that identifies and assesses potential risks and implements controls to mitigate them. This includes risks related to financial reporting, regulatory developments, and industry trends. This must be effectively communicated to the market.
- Long-Term Growth Focus
Focusing on building a sustainable business model that emphasizes long-term growth goals and opportunities is crucial. Institutional investors are often long-term holders, so smaller companies can lose potential investors by failing to provide a clear long-term growth strategy.
In summary, effective investor relations is critical for small and mid-sized companies looking to establish credibility, raise capital, and maintain positive relationships with stakeholders. These recommendations could be applied to larger companies too, but for smaller companies, they are crucial to be seen as an investible option by sophisticated global investors.
Contacts at Miranda Partners