Top tips for doing more with a smaller investor relations budget
Only a few IROs in this admittedly unscientific sample have actually seen a budget increase. Others, who have the luxury of working with flat budgets, are all about finding a few areas where they can reallocate spending into the highest-impact areas. Then there are those whose companies are in tight margin industries or turnaround mode. They have been to this dance often enough to find creative ways to get the basic job done with less, year after year.
Printing and mailing the annual report are usually two of the big-ticket items on any IR shopping list. According to Chuck Callan, senior vice president of regulatory affairs and digital programs at Broadridge Financial Solutions, the adoption rate for notice and access doubled between 2008 and 2009, with more than 20 percent of all eligible companies taking a notice-only approach. For large companies, the number is nearly 60 percent. Broadridge estimates that companies realize savings on printing and postage of more than 53 percent, on average, with a total of more than $400 mn shaved from US IR budgets since notice and access came into effect.
Michael Pepe, CEO at PrecisionIR Group, reports that his firm saw budget cuts peaking at the end of 2008 and during the first half of 2009. By way of response, PrecisionIR has reduced costs, avoided raising prices and priced some services on a ‘pay for performance’ basis while enhancing others to deliver greater value at the same cost. Optimistic about 2010, Pepe encourages clients to be open with PrecisionIR about their cost-cutting needs.
Like picking raspberries, where you’ve got to look under the leaves to find the sweet fruit, sometimes you just need to keep looking for a few new cost-cutting ideas, and even the sharpest-penciled bean counters out there will find some useful tips here.
Target: annual report
Some senior management members see the annual report as the calling card for the company, others look at it as an unnecessary expense. Either way, many companies have gone the notice-only approach and, when required, send out a 10K wrap.
Write your chairman’s letter and other annual report narrative internally. When possible, bring design in-house, repurpose existing artwork and photography or use stock photography. Don’t tell your design agency what your budget is. Instead, ask about the cost implications of its recommendations on everything from paper, design and colors to layout. Emphasize that your goal is communication, not design awards. Lower the page count and reduce or eliminate the use of color.
Pay attention to process: limit the number of reviewers and revisions, and get input early, when changes are cheap. Finally, if sales, HR or other functions significantly push your print count up, don’t be shy in demanding they pay part of the cost.
On the road
Be selective about which conferences you attend. Take advantage of management’s presence to visit investors, analysts (or customers!) who are not attending the conference. If international attention wanes, go to Europe every other year. Take either the CEO or the CFO on the road, but not both.
Manage the itinerary for sell-side roadshows. Negotiate your priorities against those of the sell-side host and take more control. Partner with other firms to host a multi-company analyst and investor day.
Schedule your analyst day in conjunction with a major industry show where management and investors will be in the same location. Use the NYSE or National Association of Securities Dealers’ facilities for your New York analyst meeting.
Invite a local brokerage branch office to host an investor get-together with high-net-worth individuals. See if it will webcast the meeting to other offices and to its institutional sales force.
Use your internal sourcing organization as a negotiator with your vendors. Make the greatest use of your website by ensuring your investor information is both accessible and navigable. Eliminate (or dramatically reduce) what you mail out or take to conferences. Podcast all your teleconference and conference presentations.
Keep it all inside
Use external agencies only on a project basis or around quarterly earnings. Use your IR colleague network as a ‘virtual’ agency. Reduce the frequency of external reports, such as stock surveillance or competitive market reports. Pull the data together yourself from exchanges, proxy solicitors and 13Fs. Leverage your marketing department’s competitive analysis.
Investigate shareholder services. For example, if shareholders’ call volume is below what you are paying for, renegotiate. Consolidate transfer agent, proxy solicitor and shareholder services and negotiate hard.
Minimize news release distribution to ensure you meet disclosure obligations, and inform trade press and local business media to look for financial releases on your website. Ask for a flat rate for news distribution.
Make use of internal resources such as sales and marketing, and reuse their materials. Find internal people with unique skills and interests (such as video production) and put them to use.
Great expectations
‘You need to focus on what I call the P/E ratio: price to expectations. If we eliminate professional video services and use in-house talent, what’s the impact? You have to be upfront and let management know the impact of your budget decisions on what you deliver. Otherwise, expectations get out of whack.
‘I think a good IR person is like a quarterback having to marshal resources you don’t necessarily control. In these times of layoffs and uncertainty, everyone is trying to demonstrate his or her value, contributions and knowledge and show that he or she is part of the team in order to feel more secure.
‘You need to let other management members know about these contributions so you can build loyalty to the IR effort and also ensure other staff know you’re not going to hog the credit for yourself.’
John Hyre, director of IR and corporate communications, Commercial Vehicle Group
Free stuff
‘Pre-buy or bulk contract newswire services for a 10 percent to 25 percent saving on the list price, depending on the size of the bulk contract. Don’t pay for event transcripts through service providers, which can typically cost $2,000 to $4,000. Use the free service at Seeking Alpha, which will have 90 percent of the conference call and events transcripts you need for competitive analysis work. Bid on everything annually with service providers. I don’t sign evergreen contracts; I make them earn my business every year by providing the best value.’
Steve Kunszabo, executive director of investor relations, Centennial Communications
Doing it yourself
‘In this environment, you have to be more self-sufficient. Ever since the exchanges changed the reporting rules, I think stock surveillance is less valuable. I started looking at data from NYSEnet and NASDAQ, pulled down 13F information updated each quarter, and put it into my own spreadsheets and charts. Maybe it’s not as pretty, but I think some managements and boards don’t care. If I can help management get to its budget numbers with the board, it’s fine with that.
‘Where there are a number of providers competing against each other for your business, take advantage of that. Let them know, Hey, I’m shopping. If the vendor wants to hold on to your business, it will extend your discount. It helped that I was with Dow Jones and the vendor wanted our name as one of its clients, so I used that, too. At Dow Jones, I used to say I had to cut my budget 3 percent to fund my own salary increase.’
Mark Donohue, senior director of investor relations, Impax Laboratories
Drastic cuts
‘I made a list of all the outside service providers I use in IR and then ranked them in terms of value. I have totally cut out or reduced by half the two or three at the bottom of the list. In terms of news release distribution, I am negotiating a flat fee for the coming year: costs in 2010 look like they will be 25 percent less than what we spent on IR services in 2009. We are a small company and the total savings should be about $70,000.’
Robert Uhl, senior director of investor relations, Halozyme Therapeutics
