I’ve never been CEO of a company until Colony. Well to be precise, my name card in Colony states “Executive Director” because I’m not big on titles, but I carry the responsibilities of its CEO. I work out the vision and strategy of the company and I find a way to execute it.
One of the important roles of a CEO though is to manage relationships with the company’s investors, something I’ve never done before. My saving grace though is that I’ve been a board member and shareholder before so I’ve learned how it feels to be on the other side. So when it came to managing investor relations in Colony, I’ve had an idea of what to do and what not to do.
We don’t have many investors in Colony but the ones we do are very sophisticated. They’re very discreet too so we don’t publicly talk about who they are but they’re among the wealthiest families in SouthEast Asia. So they’re very savvy investors who have invested in many things before and know bull crap when they see it.
Why is this important though? It’s important because investors who trust you, tell their friends about you and recommend their friends to join in subsequent rounds. It’s important because there are times you need an investor to help you pull a string, or back you on a risky business decision or invest more in you and they’ll only do it if you have their confidence.
So here’s how I do it.
- Nail down 4-5 key metrics in your investor reports to make it easy for your investors to understand.
In Colony those metrics are revenue, profit, occupancy and average price per workstation. Every quarter, we report these numbers and they’re supposed to grow. The good news is that since we started, all 4 metrics have been growing consistently every quarter so they’re a joy to report.
But what if they don’t? What if suddenly one or two metrics fall.. or all four fall? When that happens, we know there’s something wrong with the business and something has to be done. Everyone in the team is accountable for these four metrics one way or another.
I know there is a fear some entrepreneurs might have of pinning down these metrics. A common reason is that “our business is unique” or “our business can’t be pinned down to four metrics”. That’s not true in most businesses. Every business performance can be pinned down to four key metrics, it’s just whether we want to do it or not. And if we can’t pin down four key metrics then how is the organisation going to be clear on what matters in the business and what doesn’t?
The thing about metrics is that they force you to be consistent and they take away any avenue you have as a CEO to bull crap your way out of a bad investor report. If you miss your numbers in a quarter, it will be very clear. You can’t fluff it otherwise and you can’t just pick another metric to make yourself look better that quarter.
Yes this means that you’re more accountable as CEO. But hey if you want to be CEO then you HAVE to be accountable. CEOs who don’t want to be held accountable or don’t take full responsibility for their own failings don’t make effective CEOs. Besides if you’re a shareholder of the company, then wouldn’t you want that?
I’m a majority shareholder of Colony so I want what’s best for the company. If the company does well, then so do I right? And if I fail as CEO then wouldn’t I be better off if I let someone else take on the role and achieve what I wouldn’t be able to achieve on my own?
2. State FACTS in your investor reports. NO FLUFF.
What are facts? Well facts are whatever your 4-5 metrics are. Or that something tangible has been done or achieved.
What is fluff? Fluff is using bombastic words to sell an intangible immeasurable point.
It’s tempting to fluff things when we miss a tangible metric. An example of this would be a statement like this:
“We didn’t hit our revenue targets this quarter but morale in the company is very high and I believe we are PRIMED for future growth”.
That’s bull crap because the second part of the statement has no proof or data to back it.
Facts of the same statement would be
“We didn’t hit our revenue targets this quarter. I take responsibility for that. The one leading indicator I have that we’ll do better in the next quarter though is that morale has improved. This can be seen from our employee Net Promoter Score increasing from -50 to +30. “
If we’re going to quote an intangible, have a way to measure it and measure it consistently. Don’t NOT have it every quarter and then suddenly have it appear on one quarter when you need to show something.
Why does this matter? Because INVESTORS KNOW WHEN ANYONE IS TRYING TO FLUFF THEM AND IT ERODES CONFIDENCE.
I put myself in their shoes. How would I feel if I knew someone was trying to fluff me?
3. Always make yourself available
Always make yourself available for investors and for any questions they may have. Answer their messages, pick up their calls or return them if you miss them. Never avoid a conversation with them. In fact, avoid answering questions just on email. Pick up the phone and let them hear from you. That’s a lot more effective than what an email can convey.
4. Spend investor money like it’s your own.
We’ve raised quite a bit of money at Colony and while it’s tempting to take a chunk of it and throw it on Google/FB ads, we don’t do that. We count every penny we spend and measure ROI for it. Every project we invest in must have a clear ROI and payback period and if it doesn’t meet our expectations of a good payback period, we don’t do it.
When I travel on my personal expense for holidays I’d stay in St Regis or the Westin., When I travel for Colony work, we’ll stay in reasonably priced but comfortable 3-4 star hotels. Now most investors don’t expect us to slug it out at the doggiest hotels, but unless the company is pulling in strong earnings, no business class tickets and no 5 Star hotels.
5. Always be open to listening
Investors often want to be heard and it’s our job to listen. A capable CEO is one who keeps an open mind and listens, then empathises with the investor. Some investors want to be heard, some have great ideas that they think might work. Our job is to listen to them all and not be defensive or close minded about any of them but to really consider them and if not appropriate explain why.
This is how I’ve done my investor relations this far and the result has been crazy. When the time came to raise subsequent rounds, some of our investors not just followed on but doubled down. The reason they gave? They felt like I respected and valued our relationship and that made me worth the bet.
I hope these learnings help you the way they have helped me.