When you think about the end of the month, what keeps you awake each night? If you say your investor board meeting, you’re in good company! The best way to ensure you’re in good shape when the date for that meeting gets closer is to package the information you want to discuss in the best way possible well in advance. With that, I’d like to introduce you to the art of the investor report.
Investor reports are used most commonly by publicly traded companies to report on performance each quarter so shareholders can evaluate their stock equity and make decisions about actions they might take with their portfolio—like keeping, trading, selling, or buying stocks.
These reports typically include similar types of information across all companies relative to factors such as size, market, and type of business. However, private companies are only required to produce investor reports if their board of investors requires them. While this gives investors and board members the transparency they need into their investment, it also gives these companies a way to solicit buy-in on decisions and advice. Often, board members have experience in the industry, insights into other companies, and specialties in different job functions of the business that can come in handy.
When you should present your investor reports:
Before getting into what you should include in your investor or shareholder reports, it’s good to have a plan for when and, more specifically, how often you should produce reports for your investor board. Ultimately, each private company is different and so are their investors who determine when they want to meet and discuss the state of the business. So, instead of reporting regularly on a quarterly basis to public shareholders, private companies have options to report either less often, annually or biannually, or even more often as each month.
Keep in mind, your investors are not your employees. Even the most doting investors at the least experienced companies probably don’t need to see daily or weekly updates of all the operational minutia going on. In fact, this can defeat the purpose of updating your investors on the state of the business altogether (blog.drosenassoc.com). That said, if your team consists of less experienced employees and you have a highly seasoned board willing to help, you and they might prefer to meet monthly. This is common in younger startup companies who use this as an opportunity to gain as much insight and mentorship from their more experienced board as often as possible.
It is very typical of companies of all ages and sizes to meet and report to investors on a quarterly basis. This depends on the nature of your business and whether business activities fluctuate on a quarter-to-quarter rhythm. You’ll want to schedule your quarterly reports and reviews based on your fiscal year.
At the bare minimum, you’ll want to report on business performance each year. This can make sense if you have enough internal resources and talent to suffice without regular investor insights. You’ll also need a built-in trust model with investors who are confident that you’re qualified to handle everything that comes up periodically throughout the year. This can work. After all, most board members are busy with competing priorities and might not want to meet very often—every investor is different.
No matter when or how often you meet, be sure you always issue your report 10 days before the actual board meeting. This gives these key stakeholders time to consume your data and do their own homework. From there they can prepare or send questions in advance instead of on the spot.
If you are meeting on a monthly or quarterly basis, it’s best to have a board meeting to discuss your report later in the month so you have time to:
- Close your books
- Prepare the rough draft of your reporting packet
- Perform your own review and analysis
- Have your own questions answered
- Prepare & send to them with enough time to have those ten days to review and digest
Remember, your investors’ time is extremely valuable and you want to make the most of the time you have with their expertise. This time should be spent planning, strategizing, and solving large-scale, industry-specific problems. As little time and emphasis should be spent on process and questions about ‘why a number is this or that’ as possible. A well-produced report can be your best tool in teeing up the agenda to get these things done.
What information to include in your investor reports:
First think: What’s your common goal? That your business succeeds.
Keep this as your mantra through every step of your presentation. Always think about actual indicators of performance over useless vanity data that sounds nice. In other words, don’t hide areas that aren’t performing up to par behind inflated numbers that mean nothing for the longevity of your business.
These meetings and reports can be the primary influence on decisions made for the future of the company. Using smoke and mirrors over transparency and solid data does neither you nor your investors any good. Instead, be sure you include all the right information so you can build and maintain trust with your investor board:
Basic Financial Package
While this can vary based on different types of business, this package typically consists of your income statement, balance sheet, and cash flow statement.
From there you can also include comparative analysis (year-over-year, month-over-month, etc.) as a basis for judging the financial condition and growth of your business over the time period you’re reporting on.
What are your company’s key performance indicators (KPIs)? These metrics are what you use to evaluate factors that are crucial to your business’s success. This can be a judgment of anything that folds into the greater goals of the company. For example, a service or subscription company may use month-over month-sales and revenue as well as customer retention as their priorities for success. A viral news publication would instead want to focus attention on website traffic/views, click-through rates, and subscriber growth.
Financially, what are your revenue and sales goals and how is your actual growth measuring up? It’s likely that their judgement of success stems from financial gains and losses, but it’s more complicated than gains=good, losses=bad.
Why and what are you spending money on?
What sectors of your business are driving spending?
Are you hiring aggressively to meet demand? Are you spending on marketing and advertising now to generate demand and revenue?
Say you’re spending loads on outsourced vendors to support an influx of demand for a particular product or service. This could be an indication that you’re successfully marketing and selling this offering, but at this point, it could be worth investing in bringing production in-house. That smells like an opportunity to expand!
Budget vs. Rolling Forecast
Simply put, your budget is what you start with and your rolling forecast is how you adjust the budget based on actual performance and results. When costs go up, maybe due to overperforming or underperforming, then you increase or reduce your budget.
This lets businesses adjust for the unexpected: Just because it’s in the budget doesn’t mean you get to spend it OR it doesn’t mean you don’t get more. Either way, the changes you make to your rolling forecast must come in response to actually justifiable activities (your KPIs) that need to be managed.
You’ll want to directly compare these two using the budget as the control (doesn’t change), and the forecast as the variable. Budget in stone to see how outcome compared to what you originally planned for.
Board members will take all the information mentioned previously (KPIs, rolling forecast, and cost drivers) into account as you look for opportunities to grow parts of your business. This is where you combine financial data and performance to see what your audience/buyers are responding to and telling you they want more of. Identifying patterns in this direct or indirect feedback can lead to product development, co-branding/referral partnerships, and strategic hiring.
This is also where you need to factor in any risks that could affect the value of the company so shareholders can discuss anything that requires a shareholder vote.
At the end of the day, these board members are financially responsible and always want to guide the company toward a better position. Ensuring they are well-informed isn’t to just give them peace of mind, but means more can be accomplished to constantly improve your business.
Putting investor reports together:
Start looking for inspiration
A quick search for investor reports can return results from public companies who share their quarterly and annual reports with a broader audience. This can give you a glimpse into what to include and how to present with the understated style investors will expect.
You can also check out these 10 examples of beautiful ANNUAL reports that go above and beyond, compilation courtesy of API automation tool, Zapier.