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Telling a Story Investors Want to Hear

It’s the ability to tell a compelling story that will get the investment community excited about your company. It’s also a great challenge for even the largest public companies in the country.

So why is it so difficult to captivate investors with an investment story management should inherently know so well? To help solve this mystery, I’ve assembled five essential pieces of an effective investment thesis. As we build a story investors will want to hear, these elements should serve as our foundation.

1) Be substantive.

A great investment story has to have substance, including an explanation of how the corporation makes a profit and management’s vision for the future. Make sure to add details that support the investment thesis. Just be careful not to add too many details that do not directly relate to the thesis. One major tendency of management teams, especially those in more technical industries, is to inundate investors with the specifications of a product or technology.

2) Be honest. 

A good story is not the same as a perfect story. Most investors understand that – in fact, your message will be more believable when you expose a few of the risks to your success and explain how you are addressing them head-on. Many executive teams shy away from discussing potential challenges to achieving their strategic goals, but investors can spot this reticence easily, and will see it as a red flag. Perceived negative topics you should address include your competition, external strategic risks and internal challenges. Address any adversity with your proposed solution, which should show how you will improve the business and profitability in the process.

3) Listen.

Good communication is never a one-way street, and telling your investment story shouldn’t be either. That means listening to how investors respond to what you’re saying. Which aspects appear to resonate with investors? What do they dislike or criticize? The more you welcome honest feedback, the more you will receive. In addition to listening and asking thoughtful questions during one-on-one investor meetings, a more formal way to acquire significant investor feedback is through a perception audit. By using the financial community’s responses to refine your message, your company will both demonstrate its interest in a dialogue and present a story investors want to hear.

4) Make it relevant. 

By taking the messages you hear from listening to investors and applying them to your investment story, you can create a compelling message for the financial community. To communicate in a way your investors will understand, try using language, illustrations and examples that would make sense to someone who doesn’t work in your industry. Make analogies to everyday experience that bring home the key points. If necessary, simplify the thesis so that investors have no choice but to understand.

5) Be consistent.

To strengthen the impact of your investment thesis, it’s important to communicate the key points in all of your investor materials. From press releases and presentations to conference call remarks and annual shareholder letters, use the same examples, ideas and themes. For example, the language in an earnings script need not be exactly the same as it is in a PowerPoint presentation. But it must be so similar that the reasons to invest in your company are consistently repeated across the spectrum of communications materials. Doing so will ensure your target audience has heard your message, and it will also reduce the potential for the message to be obscured with unnecessary clutter.

Remember, to communicate effectively with investors, use clear, compelling messages that show how you will build shareholder value. Ultimately, that will be why they choose to invest in your company.

David Calusdian, the executive vice president and partner at Sharon Merrilloversees the implementation of investor relations programs, coaches senior executives in presentation skills and provides strategic counsel to clients on numerous communications issues such as corporate disclosure, proxy proposals, shareholder activism and earnings guidance.

Investment Thesis, Disclosure, Strategic Messaging, Buy-Side, Credibility, Sell-side Coverage, Sell-side, CFO, Investor Relations

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