Truth or Dare: When and How to Talk With Your Business Backers
Uncertain about how to communicate an unexpected development to your backers? Ask yourself these questions to help fine-tune your approach.
Is it good news?
Things that might fall into this category are an important new client, a significant improvement in your collections, or an upgrade of your technological systems. Don't miss the opportunity to bolster a financier's belief in your business with information beyond what he or she will see in your quarterly reports. You can drop your financier a note or, if it's been a while since you've made personal contact, use your news as a good excuse for a telephone call.
Have you received kudos your backers should know about?
Although it may not be worth a call, you should certainly send along copies of any articles written about your company, news of community awards, rave reviews from customers, or other out-of-the-ordinary feedback.
Do you have a real problem or just a quick blip on your company's radar screen?
You need to answer this question, without being excessively optimistic, before deciding on the proper course of action. Although you'll always benefit from being open with your bankers and investors, you may not want to worry them unnecessarily if a cash-flow glitch can be cleared up so quickly that it will not affect either quarterly results or your ability to meet monthly financing commitments. What if you can't tell the difference? That's why you have an accountant, a board of directors, and a corporate lawyer to consult.
Is your news both negative and significant?
There's no doubt that the longer you wait or the more you try to inaccurately minimize your bad news, the more you'll hurt your relationship with backers. Remind yourself that your credibility is everything with them. Then, break the news promptly and, preferably, in person.
But don't end on a bad note. It's a good idea to look for ways to follow up with communications about positive developments as soon as they start unfolding.