Maintaining transparency with your investors is key to a successful business relationship. Unfortunately, many investors feel they are in the dark regarding the inner workings of the companies they’ve invested in. Entrepreneurs must keep their investors well informed to make sound investment decisions. Here are five ways to maintain transparency with your investors.
Keep Them Updated Regularly
One of the best ways to maintain transparency with your investors is to update them regularly. It might include sending them monthly or quarterly updates and keeping them in the loop about any significant changes or developments within your company. Also, entrepreneurs should answer any questions that investors may have.
Honesty will always be the best policy for maintaining transparency in business dealings. If entrepreneurs are not honest with their investors from the start, it will only lead to problems down the road. Successful investors have professionals in their management who handle the business’s day-to-day operations. These individuals know what is happening at all times and can provide valuable input in briefing investors about a company’s affairs.
Respond to Their Inquiries Promptly
Investors should feel like the investment hears them when they have issues with the company. Respond to their questions and concerns promptly, whether it’s through regular updates or one-on-one phone calls. Entrepreneurs who keep investors waiting for responses should expect a drop in morale (and possibly even funding).
Nobody likes receiving bad news, but you must communicate it to your investors as soon as possible. This way, they can understand the situation and start looking for solutions with you. You shouldn’t wait until they inquire from you; that would show a lack of transparency.
Disclose Material Information
Be sure to disclose any information that could affect your company’s performance or stock price. Doing so helps to maintain transparency and builds trust with your investors. Most entrepreneurs do not know that investors like to keep records of their investments so they can go back and see how well the company has performed over time.
If you inform them about your progress, they will reinvest in the future. Providing hard or soft copies of every investor update can also help to solidify this relationship. They feel appreciated when you provide them with tangible progress reports, which can make all the difference in whether or not they invest in your company again.
For example, consider using private equity fund administration software to manage your fund and keep your investors up-to-date on its performance. Doing so will give them 24/7 access to see how you use their money and how the fund performs. Such access builds trust and transparency, two critical ingredients for a successful relationship with your investors. Collaborate with a professional to find the best software for your needs and budget.
Don’t Make Promises You Can’t Keep
Investors invest in you and your team because they believe in your ability to execute your vision. If you make a promise to an investor, deliver as agreed. If you can’t, it will damage your relationship with the investor and make it difficult to raise money in the future. Fake promises have made many businesses fail, so avoid this. The best strategy is to involve all investors in decision-making to avoid misaligning expectations. For example, you can’t promise dividends without facilitating a general meeting first. It’ll help you settle on the best rate and manner of payment that works for everyone.
Maintain Clear and Concise Communication Channels
Your communication with investors should be clear, concise, and professional. Remember, not all investors embrace online communication. For this reason, diversify your communication channels by holding regular conference calls and face-to-face meetings and maintaining an active presence on social media. Make phone calls and text the investors to keep them updated on your progress.
Technology has made it easier to keep investors up-to-date on your progress. Use project management tools like Asana or Trello to keep everyone in the loop and send regular updates through email or your company’s intranet. You can create a virtual data room with your financial documents, so investors can see how you use their money.
Conclusion
The above tips will help you build and maintain a good relationship with your investors by being transparent. They’ll also help you keep your business on track and avoid any legal problems that could arise from not being transparent. Remember, you need investors to succeed and can’t sideline them or their investment.
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