Rob Swystun, Pristine Advisers
Attracting investors when your business is retail is similar to attracting them in general, but the retail sector does have its own nuances, which Sharon Merrill executive vice president and partner David Calusdian has helpfully outlined, along with six key steps for effective investor relations. Despite its famous ups and downs, the retail sector can be attractive to investors, provided you communicate with them openly and honestly, and …
1) Demonstrate Your Earning Power
To demonstrate the efficiency of your company to investors, include inventory and receivables metrics. Not only will it show them the efficiency with which you handle inventory, it will give them an indication of the overall health of your supply chain. Cash flow and costs of good sold are also important metrics to share with investors, provided you don’t give away competitive information.
If investors see that a company is managing its inventory efficiently, controlling expenses and maintaining a quality brand, it will give potential investors confidence in the earning power of the company.
2) Let Them Meet Your Franchisees
This doesn’t apply to every business, of course. But, to businesses that do have franchisees, pick a few who you trust to be brand spokespeople and coach them on how to talk to investors. If you don’t let investors talk to franchisees, there is a good chance they’ll do it anyway, without management’s knowledge, so you’ll want to choose the best ones ahead of time to represent your brand.
3) Tell Them in Detail How You Engage Customers
Data and anecdotes that address details of your customer engagement strategy are of great interest to investors, who want to see that you provide an omni-channel customer experience. They are especially interested in whether the shopping experience is seamless regardless of what device a person uses to shop and whether it creates an advantage that could mean higher revenues and profits (and, more importantly to them, higher share price). Make sure you highlight any new technology you’ve adopted to make the shopping experience better and share how you get insights into your customers’ buying behavior.
4) Highlight What Makes Your Company a Unique Investment
The retail sector is highly competitive and investors have thousands of options, which makes it imperative that you make your investment opportunity stand out by having a strong investment thesis. The more obvious the differentiators, the more appealing your investment thesis will appear to investors.
5) Tell Investors Your Plan When Challenges Arise
When things don’t work out — and in retail they often don’t — communicate management’s plan to effectively deal with the situation clearly. Articulate what the issue is, what the plan is to deal with said issue and how long the plan is expected to take.
6) Clearly State Your Company’s Market Opportunity
Investors want to know that you know the size and dynamics of your market so they can be confident that you also know your market opportunity. They want to know how you’re going to penetrate the market, where you see your brand’s strengths and opportunities and why it will be successful in the aforementioned competitive market.
Not only should this be communicated, but there should be ongoing updates that highlight progress, changing trends and the impact those changes have on your business, along with how you’re addressing them.
Economic downturns and product failures are going to happen when you’re in the retail sector and it won’t always be easy to deal with them, but by remembering these steps, you can easily maintain investor confidence even during the rough patches.