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5 smart ways to keep your investors in the loop

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in Small Business Tax

Are you telling your investors everything they need to know about your company?

If not, you’re among the many small businesses that keep investors in the dark …and not necessarily on purpose.

It’s easy for investor reporting to get lost in the shuffle of running a business. But it’s a key activity that could keep financial support and new growth opportunities coming your way.

Just how much should you disclose to your backers and how often? Here are five ways to keep the lines of communication going for your company’s benefit:

1. Know your numbers. While no one expects you to be a financial wizard, you should be able to discuss the company’s financial status, including general sales and growth projections, cash flow and debt servicing.

2. Leave out the operational details. Don’t bog things down with flashbacks and replays of your daily or monthly situations. If your backers wanted to be in business for themselves, they would’ve launched their own companies. Keep them up–to-speed, but stick to big-picture news.

3. Stay conservative about projections. Rule of thumb here: Act like a public company. You can talk about last quarter’s results, any deals in progress and similar updates, but stay away from big forecasts and forward-looking statements, such as, “We expect to bring in $1 million next season.”

4. Include the bad news, without the sugarcoating. Most investors are well aware of business dips and curves. You don’t want to surprise your supporters by the departure of a big-name client or the need for more cash. Be timely about changes that impact the business, good and bad.

5. Consider a regular communiqué. You might want to send out a quarterly e-mail report or even create a password-protected channel or secure extranet for investors and other stakeholders on your Web site. You can periodically post insider news, financial statements, K-1 filings, sales agreements and more.

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