This was a conversation my business partner and I had on several occasions for a while now: when do you know it’s time to take some chips off the table and start investing in other vehicles? Stocks, real estate, funds, maybe even something more exotic like another startup.
I know in practice a lot of business people, the answer feels simple. Diversify. Protect against risk. Don’t put all your eggs in one basket. That’s Finance 101, right? But I’m finance stupid. That’s where my business partner comes in. I know it sounds crazy but I don’t have a grasp of our finances the way he does. He often worries for the sake of our trust to be involved in our tax planning and audit discussions with our firm. He wants my weigh in, and the truth is I do so with some mild contempt because I also dislike listening to the vendors we hired. This really comes from my lack of interest in our finances. I focus on top line. I bring in money. I focus on what I’m good at, my own sweat, my vision on my responsibilities. I completely trust my business partner in how he chooses to manage our finances, but he’s right. The very least I can do is be completely aware of what’s going on in case he’s indisposed. A big sticking point of our discussion is expansion of our liquidity.
I don’t see our small business as an asset. MOre like a living organism. It needs constant feeding, time, attention, and capital. Every dollar we could put into another asset is a dollar that might accelerate growth here. So it’s not just about risk tolerance. It’s about momentum. If we take money out now to hedge, do we end up starving the thing that could yield more than any fund or ETF ever could? I don’t know.
At the same time, our business is still risky by nature. Watching people and entities in our network claiming their smart plays outside of their businesses sometimes makes me wonder if I’m being reckless by doubling down only on ourselves. Are they even being truthful?
The hardest part is there’s no clear signal. No bell that rings to say “it’s time to diversify.” No spreadsheet that perfectly balances growth vs. security. Some founders diversify too soon and miss out on their company’s breakout. Others wait too long and get wiped out when the winds shift.
If I’m honest, I don’t know the right answer (yet). I’m leaning on my business partner on this one and if something comes up that sounds pretty good, I say we just do it. I don’t like the blind move but I am just not educated enough to make the call. Maybe that’s stubbornness too. He makes good points that it opens up our network for other opportunities that drive business back.
And if nothing else, the uncertainty is a test of judgment calls, risk appetite, and timing.Three things I always want to master by practicing.