We all have expectations: warm, sunny weather in the summer, snow in the winter. But as we all know, sometimes what we expect is not what we get, and we are forced to deal with scorching heat in July and blizzards in January. We know we have no control over nature, so the weather represents expectations that manage us.
But there are expectations that you can manage—namely, what people are saying about your company.
Public perception plays a large role in the life of a company. Unlike Mother Nature, over whom there is no control, you can have substantial influence over the public's perception of your business. It comes down to how to win friends and influence people; the more cynical among us would call it the fine art of manipulation. But it is not manipulation at all but communication!
There are three groups of people that you must address if you are a publicly traded company and wish to be successful: Your shareholders, the public—which includes the media—and Wall Street analysts (and I group both the sell-side and the buy-side together for the sake of brevity).
All three of these MUST perceive the same story. What is the story and how do you get it out there? Here are several bits of advice that I can pass on from the buy-side after spending a dozen years on the sell-side.
Your presentation must tell your company’s story clearly and succinctly. Remember that you are selling the Company and yourself, and assume you will not get a second chance.
Minimize the verbiage and save the minutiae for those who ask for it. Take advantage of tables, charts, and graphics that you need to illustrate a point—but keep it simple. Choose colors that not only show well on a screen—and can be read from the back of the room—but that can be reproduced clearly in black and white.
Put the presentation on your website but only if you are going to keep the site up to date. Your website must conform exactly with the presentation you use at meetings and conferences.
Analysts will draw their own conclusions, but I cannot stress enough how important your guidance is to them. For example, do not over promise and under deliver. This is one of the biggest traps that companies fall into. Don’t hint at deals, and don’t hint at results. If you present a timeline with milestones, make sure that you have a high likelihood that you will achieve the majority, if not all, of the milestones. Keep some in your pocket so that you will have some positive surprises. Shareholders love them!
If you have deals in place, obviously talk about them and reveal as much as you can. Be accurate in your description, thus minimizing doubts or uncertainties. Remember that analysts love to prod for terms.
Guide analysts as well as you can and don’t let them get carried away with a story that you know you can’t live up to, or with revenue or earnings numbers that you might not meet. Understand that once a report is published it becomes gospel for the firm that publishes it and for the clients who follow that analyst.
A thorough analyst will try to double-check your information and numbers with their own sources, and analysts can be very resourceful. Remember, you want to exceed analysts’ estimates; meeting them is not good enough. We have all seen stocks get crushed, so don’t set yourself up!
Strictly limit who within the Company can talk to the public. Consider appointing or hiring a Director of Investor Relations. If you are still small and are counting pennies—not a bad idea even if you are large—your CFO can fill that roll. As you grow, hire a pro. This is a very important job and requires much more than mailing information packages and e-mailing press releases.
Speaking of press releases, like your presentations they should be succinct. Don’t shy away from outside help here. There are a handful of excellent firms that have tremendous expertise in proving these services. Use them; they will help you position the Company and help position the public perception.
If your company is presenting data at a scientific conference, brief the presentor(s) before the meeting. Remember, analysts and the media attend these meetings, which are a huge source of information.
Analysts also love schmoozing with your scientists, and many times over-zealous scientists inadvertently give away information that you would prefer to remain within the family. Though you may have control over what your employees say, you have less influence over the comments that your outside investigators may offhandedly make.
Carefully manage the flow of information, but be honest and timely. In the same fashion that you will want to discuss good news, discuss the bad news, too. I like to quote General H. Norman Schwarzkopf, who commanded Operations Desert Shield and Desert Storm a decade ago: “Bad news doesn’t get better with age.”
Convene a conference call, tell what you know, answer the questions that you can, and leave nothing to the imagination. Doubt sows rumors, and we all know how rumors grow and to what end.
One last bit of advice: occasionally monitor the investor chat rooms. You will get a sense of what people are saying about your company—but NEVER log on as a participant!
Ira Leiderman is managing director of the Palladin Group, a New Jersey-based investment management firm. He was previously a senior healthcare banker at Gerard Klauer Mattison. You can e-mail him at [email protected] .
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