For the past several quarters, many companies have cited economic uncertainty as a reason to convey little -- if any -- insight into their future prospects or the milestones by which strategic progress should be measured. For the most part, investors have understood that trying to project into the future in such an environment can be risky, if not meaningless. But though there is still uncertainty on the global front as we approach the second half of the year, the economic waters have begun to settle enough so that investors are again demanding more qualitative and quantitative information about expectations for 2011 and beyond for the companies and industries they follow.
Are you ready for this conversation?
Most likely, you have done a yeoman's job to keep investors current on your company's efforts to streamline operations and manage the business to generate and maintain liquidity while positioning it strategically for profitable growth when the recovery arrives in full force. However, investors and analysts also need to see a picture of where the company is going, both near-term and long-term, and understand what organic or acquired growth catalysts will be levered to move the company forward to its "desired state."
As you prepare for this conversation, you can use this opportunity to redefine the type of guidance you will provide going forward. In the past, guidance essentially meant projecting revenues or earnings three to 12 months into the future. Today, guidance has a much broader definition and can address any number of metrics that are important to monitor the health of the organization and the progress it is making against strategic goals. These include margins, EBITDA, cash flow, product mix, geographic mix, revenues from new products and backlog, among others. By properly using such metrics to establish clear and achievable expectations with investors and analysts, a company can further differentiate its value proposition, as well as leverage one of its most powerful intangible assets -- management credibility.
Here are some key points to consider in discussions about your company's outlook:
- Insights and perspectives on the company and/or market conditions for the next quarter, full year and the coming year, if possible.
- Key growth drivers for the business and/or market opportunities.
- Financial guidance on key metrics in whatever detail makes sense for your organization and for whatever time periods are appropriate.
- Clear explanations of the financial, business and macroeconomic assumptions on which the estimates are based, along with discussion of any possible changes in circumstances that could alter these assumptions and, in turn, require a revision of the estimates.
- Discussion of any changes that have been made to prior forecasts and the reasons for those changes.
As the economy continues to reset and move toward recovery, investors and analysts are aggressively sifting through the markets for value and growth opportunities. Companies that expand their message platform to include clear and measurable guidance have the best chance of elevating themselves among the field of investment options