It is very important that entrepreneurs have in place a strong communications plan for their investors. The more engaged investors are in a venture, the stronger and more beneficial the relationship can become. Of course, every business and each investor is different. It is therefore imperative that your communications strategies are tailored to the unique wants of your investors and the needs of the company.
First, you can’t go wrong with formal communications methods like written monthly reports. Monthly reports containing P&L information are a great way to inform investors about the status of your company and where funds are being allocated. This is especially helpful in supporting your efforts because investors can often recommend course corrections if they see any “red flags” in the P&L report. They also might be able to suggest connections that can help your venture. This type of insight and guidance is invaluable when starting a company. One other thing to note regarding monthly reports is that they don’t need to be too comprehensive. Monthly reports should give a detailed snapshot of your company at that time. There are other more effective ways to provide a holistic view of the status of your company.
Another effective way of communicating is a quarterly conference call update with investors. Some investors like having the ability to ask questions about the report. So, instead of just sending the document to investors to read at their leisure, think about offering a personal review of the report on a conference call as well. It shows engagement and the willingness to answer any tough questions from investors. And starting a conversation with investors can be great for brainstorming ideas. You can share thoughts and advice more freely than on email. Finally, one tactic that helps make the calls worthwhile is to create a script beforehand, so that you cover every point that you want to highlight.
A third strategy is in-person quarterly or annual meetings. This is probably the most effective communication strategy. Investors often expect companies to provide time for them to share their knowledge and offer advice because that is one of their responsibilities as an investor. When they can meet with you face-to-face and to see the operational side of the company, they have a better understanding of where improvements can be made or where successes are being had. In-person, collaborative meetings with investors can help to brainstorm ideas and identify growth opportunities.
In summary, the key to any communications strategy in business is honesty. Investors are genuinely interested in the success of their ventures so being honest about the status of the company is crucial to its survival.