Sat Series: The importance of setting targets for investor experience

Going back to the fundamentals and setting targets

Investor experience. Do you have targets, and how are you tracking them (if at all)? 

Because it’s really no different to any other function of your business, and you need measures in place to stay accountable against your targets throughout the year. 

This is definitely an area that can benefit from measurable progress, so let’s get into the why before I give you an example you can bring back and use in your company. 

What are the targets for investor experience?

There are a lot of different functions in a listed company, and we have defined targets across all of them. 

Employee experience might have KPIs or OKRs, sales might have targets and revenue, and customer experience has retention and growth forecasts.

What about investor experience?

I’ve been speaking to a lot of customers about actually quantifying what they’re looking for because most will answer “more” when I ask about shareholders or “higher” when talking about their share price. 

But I want definitive, measurable targets that we can hold ourselves accountable to. So I took the time to put together an example that we can go through, and you can take it away as a template for your own use.

It’s time to get hypothetical.

There are 2,400 listed companies on the ASX, with an average market cap of $1bn. If we look at the median company (ranked 1200), we can see that the market cap is a little more representative at approx $49m, with 3,500 existing shareholders. 

Let’s use that for our example, and I’ve established some example metrics that you can use that come up frequently in my discussions with customers.

Our hypothetical company has some ambitious goals. We’re primarily looking to increase share price and therefore market cap by influencing these metrics:

1. Increasing our shareholders by 1,500 

2. Lifting our daily trading volume to $100k

And we can get more granular here because that’s still pretty broad without breaking it down into specific actions. So let’s flesh out the details.

• If we want 1,500 net shareholders gained, we’ll need to find closer to 3,000.
  
  That’s on the assumption that for every two shareholders gained, an existing one may churn, representing a shareholder growth ratio of 2:1 (which is a solid long-term goal to aspire to).

• If we want to hit $100k in trading volume, we’ll need to average $62.5k for the next twelve months.
  
  We take the midpoint between $25k and $100k because we’ll assume we ramp evenly up to our goal at the end of the year.
  
  $62.5k in daily trading volume, five days a week and 52 weeks a year equals $16.25m in buying volume that we need to find in the next twelve months to hit our goal. 

We want 3,000 new shareholders, to buy a total of $16.25m of stock in the next twelve months. 

Or to make it even more simple, 3,000 investors buying $5,400 in stock. 

And I know that volume doesn’t necessarily equal a higher share price, but an increase in demand typically does. 

That’s how we have the best odds of increasing our share price and hitting our market cap goal for the year. And even better, more liquidity de-risks the investment for larger shareholders like instos and HNWs who are sensitive to liquidity risk.

So let’s set some goals

So there’s the power of setting targets and goals for investor experience. By having a clear target, we can break it down into tangible goals and set clear plans to achieve it. 

And in our hypothetical, achieving those goals could create up to $45m of investor value, which is an amazing outcome to work towards. In terms of how we achieve them, that’s really the next step now that we have clear goals and some context on what we need to do. 

1. Gaining 3,000 new shareholders needs to be a one-to-many approach because we’re not going to have the resources to do that one-to-one. 

2. An average cheque size of $5,400 gives us some flexibility on where to get it from.

3. Being sub $250m and looking for on-market support means we’re only looking at retail and HNWs - instos won’t be buying here. 

We’ll need to ramp up our retail investor collateral, take them on the journey at scale, and optimise how we acquire new shareholders while figuring out our next steps. Then we can set regular check-ins against the plan - but now we have a clear target, a reason for it, and a means to get there!