Good Results Are Better Than Long Explanations
Good results are better than long explanations. If nothing else, you will remember that.
Investors value clear, concise, and consistent messaging that instills confidence and is delivered with unshakeable commitment. Weaving stories throughout your presentations, financials, market data and performance metrics will enhance credibility and help anchor floor valuation. Stories offer an insightful alternative to guidance and force the listener to take a longer-term perspective. Stories simplify complex information. Things like client use cases, collegial anecdotes from the executive meeting or sales conference and foundational tales of particular relevance (see Appendix) all serve as great opportunities to bring valuation to life, parking it in the investor imagination, where it can be remembered.
When pitching to investors, stories that resonate with human emotions, intellect, and future thinking make it easier to appreciate the broader context, understand the journey of your business, and envision the potential for an investment that can generate superior returns.
Too many IROs target and segment investors using traditional tags that yield only a shallow understanding of their motives and behaviour. GARP or growth, value or momentum…you should throw these away. Sure, these labels are logical and important in asset management, but confusing and illogical when trying to make the best use of your CEO's time.
Spend your time targeting the intrinsic investor: the ones who do significant due diligence, require a CEO meeting before initiating a position and go deeper in order to keep adding, but when they do it is for the long haul. They become supporters of management, circumstantially cheerleading, sharing your stories or defending the strategy as needed. And they tend to carry weight in a collegial way among like-minded decision-makers within and across pension funds, mutual funds or family office communities. Fish where the fish are, as they say. These are the meetings that yield the highest return on CEO time.
“You must value the business in order to value the stock” – Charlie Munger
Let's assume your strategy is set and now you need to help package and sell it to all sides of the Street. Why would specific, personal or anecdotal stories be so crucial to your investor narrative?
- To get connected: Stories personify a company and its leadership dynamic. Intrinsic investors use CEO or CFO meeting time wisely – not to review models and interview the company, but to evaluate and (yes!) judge the EQ of the storytellers behind the business.
- To mitigate risk: Not only does effective storytelling help mitigate potential risks and challenges in a way that feels manageable, but you are also building personal equity and rapport as you address them. By articulating challenges and obstacles within a larger narrative, you are better able to demonstrate resilience, adaptability and a strategic approach.
- To illustrate market potential: A well-told story can effectively illustrate market potential. Just back from visiting facilities or customers overseas? Talk about it. In doing so, paint a picture of the problem you’re solving, the size of the unicorn market opportunity, and the unique position you’re in to seize the moment.
- To showcase traction, momentum and success: Stories can highlight key milestones and successes, providing evidence of traction in the market. Whether it's customer success stories, product launches, or what’s driving revenue growth, these narratives build confidence in the viability and potential of your ability to execute.
- To communicate strategic direction: A good story helps communicate your vision for the future, as well as the paths you're charting or the levers you’re pulling to get there. Most investors want to know where your business is headed and how you plan to get there. Intrinsic investors get excited, root for your success and, most importantly, want to be part of the journey.
- To build trust and credibility: Investors invest not only in the business idea but also in the people behind it. Sharing your personal or team's journey, values and commitment through storytelling builds trust and credibility. It humanizes your business and makes it more relatable.
- To differentiate your company and personify the culture: In a competitive landscape, investors often see numerous pitches. A unique and memorable story helps your business stand out. It distinguishes you from others by highlighting what makes your approach, team, or solution special.
Along with the IRO, the C-suite (or designated members of it) should act as torch-bearing ambassadors to the Street. When they can convey how deeply and personally invested they are in the potential to build and grow, excitement becomes contagious, believers buy and momentum mounts. That leads to more passion, more meetings, more excitement, to the moon. That’s true unless you overshoot, in which case stories become excuses, and you’ll recall that ‘good results are better than long explanations.’
In conclusion, the power of stories and storytelling in the realm of stocks is undeniable. Beyond the numerical data and financial reports, narratives shape perceptions, influence investor sentiment and contribute significantly to overall market dynamics. A compelling story can enhance a company's brand, build trust and ultimately impact stock performance. Investors who understand the narrative behind a stock are better equipped to make informed decisions, recognizing the broader context that numbers alone may not convey. As we navigate the complex landscape of financial markets, acknowledging the profound impact of storytelling adds a nuanced layer to investment strategies and fosters a deeper understanding of the dynamic relationship between narratives and stock value.
Appendix: The best stories to tell investors revolve around challenges, successes and lessons learned
Founding Story: Share the journey of how your business started, highlighting the initial idea, challenges faced and the determination that led to its establishment.
Customer Success Story: Narrate a story about how your product or service positively impacted a customer. Include specific details about the customer's problem, your solution and the results.
Innovation Tale: Detail a time when your team innovated, whether it was the development of a new product, a creative marketing strategy, or an operational improvement.
Overcoming Adversity: Discuss a challenging period in your business and how your team navigated through it. Highlight the lessons learned and the strategies employed to overcome obstacles.
Team Triumph: Share a story that exemplifies teamwork within your organization. This could be a successful project, a collaborative problem-solving effort, or an achievement that resulted from collective effort.
(Re)branding Journey: If your business underwent a rebranding process, share the story behind it. Discuss the reasons for rebranding, the challenges faced and the positive outcomes.
Partnership Success: Talk about a successful partnership or collaboration that benefited your business. Highlight how the partnership was formed and the positive impact it had.
Failure and Learning: (Choose timing and audience carefully.) Narrate a story about a project or initiative that didn't go as planned. Discuss the lessons learned, how you pivoted and the positive outcomes that emerged from the experience.
ESG/Sustainability: Share stories about your company's involvement in community projects or sustainable practices. Illustrate the positive impact your business has beyond profit.