What is the Shareholder Letter?
Template of Shareholder Letter
A standard letter contains the following topics or headings –
#1 – Introduction and Motivation
In this section, the management describes the company’s affairs, its goals, mission, and the principles that the company follows, along with a brief welcome note to the readers.
#2 – Financial Results
This section highlights the company’s financial results during the year. The company’s performance is in terms of revenue and profits of the various branches or undertakings are reflected along with highlighting the reasons that lead to such performance. Apart from revenue and income, an overview can also be given concerning other aspects such as loans, capital, and market share.
#3 – Achievements
In this section, the management discusses the achievements met by the company during the year. It could include information about opening new branches or business verticals, capturing market share, new investments, innovations, inventions, partnerships, etc.
#4 – Market Conditions
Here, the prevailing market conditions in the industry in which the company operates are described. The effect of such conditions, whether positive or negative, shall also be mentioned here.
#5 – Plans and Measures
In this section, investors get an update about the measures adopted by the company to improve its overall conditions. Also, the plans proposed for the upcoming years are discussed with their expected outcomes.
#6 – Acknowledgement
The letter ends with an acknowledgment note wherein the management concludes their thoughts and thanks the investors and other stakeholders such as employees for their continued support.
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How to Write a Shareholder Letter?
- Collect Information
Get in touch with the product heads, financial heads, and other top executives to get an idea about the star products and services, revenueRevenueRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.read more, growth, profitabilityProfitabilityProfitability refers to a company’s ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company’s performance.read more, projections and plans, challenges faced, achievements met, and other relevant data. Frame the data in the form of notes.
- Organize Data
Once you have gathered the relevant data and the notes, bifurcate them into relevant sections or headings. After sorting the data into headings, formalize the data by way of paragraphs and pointers under each other so that a basic outline of the letter is ready.
- Finalize the Letter
After the outlining, formalize it and add a nice introduction and an acknowledgment of the letter. Highlight the information wherever necessary to gather attention to such areas. Carry out the proofreading of the document to assure that the document is free from any error.
Why do we Need a Shareholder Letter?
Shareholder Letter Example
Following is a draft letter from a company named ABC Inc. which deals with motor cars:
Dear Shareholders,
I begin the letter with the utmost pride for the company and its dedicated employees throughout the country and abroad. Keeping in mind the economic changes that the country is facing, I am happy to announce that the company has achieved excellent results not just financially but also in operational terms as we continue to add new clientage and audiences and expand throughout the globe.
In the year 2018-19, we continued to expand and were able to increase our revenues by 24%. Along with the increased revenues, the company was able to enhance its profits to $20 million, an increase of about 18% compared to last year. We intend to continue with a trend in the coming years also.
We enhanced our geographical presence by opening new branches at seven different locations. Also, we opened five new manufacturing plants during the year. We plan to add up locations abroad for operational efficiency and greater reach.
As you must be aware, the automobile industry suffered an all-time low this year. Thus, even we suffered and could not meet the expected target of increasing revenues, which was targeted by 35%. However, we managed to reduce the effect of industry stress and hailed through the same.
In the end, I would like to present my heartfelt gratitude to the shareholders and the employees for their continued support and confidence in us.
Yours Sincerely,
CEO
ABC Inc.
Things to Remember
There are some tips for writing a good shareholder letter –
- Highlight the achievements of the company, and do not just go over describing the business activities only.Provide insight into what the investors may see in the coming future, i.e., the milestones the company intends to achieve in the following year and how the company expects to achieve them. When talking about the milestones, be reasonable.Appreciate the employees or the executives to let them know as well as the investors that the company values its employees.Talk about how you run the business as investors may need to recall how the company runs the business and what its purpose is.It is acceptable to acknowledge the problems faced during the year. Mention the problems along with the factors which lead to those problems.
Recommended Articles
This has been a guide to what is the Shareholder Letter. Here we discuss how to write a shareholder letter and why we need it, along with the template and example. You can learn more about financing from the following articles –
- Shareholders AgreementShareholders Value DefinitionShareholders Equity DefinitionShareholder Equity vs Net WorthEquity vs Royalty
