What is IR?
For small cap companies, the view of communications is most often through the lens of Investor Relations (IR) – the process of interacting with shareholders, the investment community and the financial media.
Since the primary objective of any public company is to enhance shareholder value, attract new investors and meet regulatory obligations, the need for IR is self-evident, whether conducted by senior executives, internal IROs or external IR professionals.
With IR firmly at the controls of corporate messaging for small caps, it is easy for them to stop there and dismiss or ignore other ways in which their companies’ investors can have their returns maximized. Few seem to consider that there are important relationships to nurture beyond those with the investor.
The Importance of Public Relations
Conveying compelling content about a company to key segments of the broader public, who can potentially become stockholders, customers or brand advocates, can contribute to enhancing value for the existing shareholder. And the best way to reach these groups with this type of messaging is via public relations.
One gets the feeling that many (most?) small cap company execs look upon public relations as an unnecessary and maybe even frivolous luxury. They may not see the cost-benefit of it nor appreciate that their companies’ often have interesting stories to tell beyond earnings per share. Or they conflate it with advertising and marketing and thus consider it a checked box.
But an effective public relations program can have a significant impact on the public perception of a company. In turn, those positive vibes (or conversely, negative ones) can influence the decisions of individuals to buy, sell or hold a company’s stock or purchase its widget, as well as have a profound effect on its overall reputation.
Then there is the outsized sway of social media. It’s always lurking in the shadows and capable of spreading a damaging story, or a complimentary one, virally in the blink of an eye. Thus, any company that ignores reputation management does so at its own peril. Layering in a public relations plan can help mitigate those risks and amplify the rewards.
How to Seamlessly Intertwine IR and PR Strategy
Despite the perception, augmenting an investor relations program with a PR strategy can be done relatively seamlessly and need not be cost-prohibitive if a few simple guidelines are followed:
- As a small cap, there is no need to hire a large public relations shop. There are many well qualified small boutique agencies and even sole practitioners that can provide the level of service needed at a cost that is manageable. The fewer cooks in the kitchen, the more economical the process and the price tag can be, so going small makes a lot of sense.
- Since the team will be small – maybe as few as two people – it’s important that there is a smooth and collaborative feel to the relationship. Vetting not only the capabilities of the agency or rep, but also the disposition and working style of the individual(s) on the account is crucial to the success of the overall effort. It’s a little like dating in that it’s necessary to find that elusive “chemistry.”
- Keep it simple. Too many concepts at once dilute the impact of any strategy. In addition to being more effective, identifying one or two key messages that will resonate with the target audience focuses the team, reduces complications and conflicting opinion and helps keep costs down.
Whatever the ultimate strategy and messaging that’s decided upon, it will almost certainly involve a mixture of traditional, social and digital media tactics. This may seem foreign to the person on the company side that’s working with the PR rep if they are not accustomed to operating in this milieu. If that is the case, it would be beneficial for this individual to familiarize themselves with the PESO PR model – Paid, Earned, Shared and Owned media.
There is no doubt that investor relations will and must continue to play the leading role in the small cap company’s outbound communications strategy. However, there is a strong case to be made that an expanded role for public relations as a complement to an effective IR program can also be a best practice.
PR can drive shareholder value without many of the constraints of regulatory compliance and with much more freedom of expression in terms of the various formats and topics that can be weaved together to tell a company’s story.
Done right, the ROI of a properly executed public relations strategy can be tangible and needle-moving for the small cap company. By providing access to a largely untapped pool of potential shareholders and customers, an effective PR campaign achieves the same goals as a successful IR program, enhancing shareholder value and attracting new investors.
Gregg Castano is the Chief Executive Officer of Castano Communications Consulting, LLC