For public companies, investor relations (IR) is a critical function that involves building and maintaining strong relationships with shareholders, potential investors, and the financial community. IR professionals are responsible for communicating the company's financial and operational performance to external stakeholders and providing accurate and timely information to the investment community.
However, managing IR can be a complex and time-consuming task. For smaller companies that may not have a dedicated IR team, the IR consultant can act as if they are a member of the team and handle all IR-related activities. For bigger companies with IR department, strategic IR consultants can be highly effective in diagnosing reasons why a company’s stock might be under-performing or if there are areas for improvement in the IR function. In such cases, hiring an investor relations consultant can be an effective solution to ensure that the company's IR efforts are effective and efficient.
In this article, we'll explore what an investor relations consultant does, how to hire the right consultant, and the benefits they can offer to public companies.
What is an Investor Relations Consultant?
An investor relations consultant is a professional who provides advice and support to public companies on how to manage their IR efforts effectively. They work closely with the company's management team and IR staff to develop and implement a comprehensive IR strategy that meets the company's objectives and engages with investors.
Why Should You Hire an Investor Relations Consultant?
Hiring an investor relations consultant can offer several benefits to public companies, including:
Expertise: IR consultants are experts in the field of IR and have a deep understanding of the investment community and financial markets. They can provide valuable insights and guidance on how to communicate with investors effectively and navigate complex regulatory requirements. These are generally areas that the C-suite does not have or is not required to have.
Objectivity: IR consultants provide an objective perspective on the company's IR efforts, which can help identify areas for improvement and develop new strategies to engage with investors.
Flexibility: IR consultants can be hired on a project or retainer basis, depending on the company's needs and budget. This provides flexibility and allows the company to scale its IR efforts based on its financial resources.
Time-saving: IR consultants can help save time by handling routine IR tasks such as drafting press releases, preparing investor presentations, and responding to investor inquiries.
Value enhancement: More experienced IR consultants take things a step-further and can drastically alter how a company’s story is told, change the company’s key performance indicators, prepare management for Q&A, and write scripts for earnings calls.
How to Hire the Right Investor Relations Consultant
When hiring an investor relations consultant, it's essential to find the right professional who can meet the company's specific needs and objectives. Here are some tips for finding and hiring the right consultant:
Look for experience: Look for a consultant who has experience in the company's industry and understands its unique challenges and opportunities. Check their references and past clients to ensure that they have a proven track record of success. If you’re hiring a strategic IR consultant, it’s best to hire one that has experience being an investor, as this will help them show you how to best communicate with investors.
Evaluate their skills: Evaluate the consultant's skills, including their communication, analytical, and strategic planning skills. The consultant should have excellent communication skills, be able to analyze complex financial data and provide insights, and develop a comprehensive IR strategy. Former financial analysts – both buy and sell-side, tend to make excellent IR consultants since they have experience dealing with financial models, guidance, and earnings calls.
Assess their availability: Determine the consultant's availability and workload to ensure that they can provide the necessary support and meet the company's needs. Also, it’s important to understand who will be on your account. Don’t get fooled into hiring a big firm that has sold you on the experience of their partners if the people who will actually be doing the work on your account are more junior and have less relevant experience.
Consider their fees: IR consultants can be expensive, but the good ones can really enhance a company’s reputation and value. Conversely, a mediocre one can frustrate investors who expect better. Good IR consultants tend to charge monthly retainers and have year-long engagement contracts. The top IR consulting firms also command success fees based on how well they perform for their clients.
What Can an Investor Relations Consultant Do for Your Company?
An investor relations consultant can offer several services to public companies, including:
Crafting the company’s “story”: An IR consultant can help distill a company’s complex story down to the salient points that investors care about. Making a company’s story easy to digest and understand is critical. Generally, former investors do the best job of this since they used to be investors and know what stories are supposed to sound like.
Changing the company’s key performance indicators: An IR consultant can help develop the right KPIs to release to Wall Street so that investors can properly monitor and track a company’s progress towards achieving their financial goals and targets beyond simply analyzing a company’s published financial statements.
Q&A Prep: An good IR consultant will anticipate the types of questions investors will ask a company and will prepare the company to answer those questions completely and with confidence.
Financial analysis: The best IR consultants will analyze your financial results through the lens of an investor. This will help them prepare you for questions you are likely to receive from the investment community.
Script writing: A good IR consultant can help write earnings scripts that appeal to the broader financial community, while succinctly telling your story and addressing investor questions and concerns head-on.
Developing an IR strategy: An IR consultant can help develop a comprehensive IR strategy that aligns with the company's goals and objectives. The strategy should include key messages, target audiences, and communication channels.
Creating investor presentations: IR consultants can help create compelling investor presentations that effectively communicate the company's financial and operational performance to investors.
Managing investor communications: IR consultants can help manage the company's investor communications, including drafting press releases, responding to investor inquiries, and coordinating investor events and conferences.
Providing market intelligence: IR consultants can provide market intelligence and insights on industry trends, competitor analysis, and investor sentiment.
Building relationships with investors: IR consultants can help build strong relationships with investors by identifying key investors and developing a tailored approach to engage with them.
FAQs about Hiring an Investor Relations Consultant
Q: How much does it cost to hire an investor relations consultant?
A: The cost of hiring an IR consultant varies depending on their experience, services provided, and the length of engagement. Most consultants charge monthly retainers. IR outsourcing firms charge retainers that range from $5,000 to $20,000 per month while strategic IR consulting firms charge retainers that range from $20,000 to $50,000 per month plus a success fee and expense reimbursement.
Q: What qualifications should an investor relations consultant have?
A: An investor relations consultant should have a strong background in finance, with secondary experience in communications. The best IR consultants are former investors or sell-side analysts as they have experience dealing with financial models and investors. IR consultants should also have excellent writing and presentation skills, be familiar with SEC regulations and disclosure requirements, and have a deep understanding of the investment community and financial markets.
Q: What are the key qualities to look for when hiring an investor relations consultant?
A: When hiring an IR consultant, look for someone who has experience with investors – this is generally someone who has been an investor or a sell-side analyst. Secondarily, look for someone who has experience in the company's industry, strong communication and analytical skills, and a proven track record of success with other public companies. A good investor relations consultant should be able to easily provide you with references of other clients that are happy with their (not just their firm’s) work. Making sure you check the consultant – not the consulting firm – is a critical step in hiring the right IR consultant.
Q: How long does it take to see results from an investor relations consultant?
A: The timeline for seeing results from an IR consultant can vary depending on the company's goals and objectives. However, it's essential to have a long-term perspective on IR efforts and understand that building strong relationships with investors takes time. This is generally why top IR consultants demand year-long engagements and often, companies renew these engagements on an ongoing basis.
Hiring an IR Consultant – Final Thoughts
Hiring an investor relations consultant can be a smart investment for public companies that want to build strong relationships with investors and increase shareholder value. IR consultants offer expertise, objectivity, flexibility, and time-saving benefits that can help companies develop and implement a comprehensive IR strategy that aligns with their goals and objectives.
When hiring an IR consultant, it's essential to find the right professional who has the experience, skills, and availability to meet the company's specific needs. By following the tips and recommendations outlined in this article, companies can find the right IR consultant and leverage their expertise to achieve their IR goals and objectives.