You pour everything into your startup, seeing it as the only investment that matters. However, world-class founders often maintain a detached, analytical view, much like a professional portfolio manager. You need to assess your business’s performance objectively, separating your personal identity from its market reality. This article will explore how adopting the approach of a portfolio manager can help you make smarter strategic decisions and improve your chances of finding startup success. Keep reading to discover the lessons that founders can learn from portfolio managers.
Evaluating Opportunities with a Portfolio Manager’s Eye
A portfolio manager continuously weighs potential returns against risks across various assets. You should apply this same rigour to your internal business initiatives, viewing product development, market expansion, or hiring as distinct ‘investments’. This framework forces you to quantify expected outcomes and allocate your limited capital (money and time) to the ventures offering the most attractive risk-adjusted returns. By evaluating opportunities with a portfolio manager’s eye, business founders can make smarter strategic decisions.
Diversifying Founder Risk & Resource Allocation
Portfolio managers never bet the farm on one stock; they spread their exposure to mitigate volatility. You can learn from this by diversifying your business resources. Instead of overcommitting to a single key client or technology, maintain a diverse mix of revenue streams and development projects – this is key for minimising risk and avoiding “putting your eggs in one basket”. Consider how a model portfolio service operates to strike a balance between stability and growth, and apply a similar approach to your business operations.
Rebalancing & Exit Strategy
Managers regularly rebalance their portfolios, selling off underperforming assets and increasing positions in winners to maintain their target risk profile. You must be prepared to make similarly tough, rational decisions about scaling back or even exiting non-core projects that drain resources without delivering value. This discipline ensures you keep capital flowing towards the most promising areas, securing your long-term success.
There are many challenges involved in starting a new business. There are always risks involved, but adopting the approach of a portfolio manager can help founders learn many important lessons and avoid some of the common pitfalls that startup owners make. The world-class founders who achieve the highest levels of success are the ones who maintain a detached and analytical view similar to a professional portfolio manager. Hopefully, the information in this post will help you assess your company’s performance objectively, allowing you to make shrewd business decisions that remove emotion and put your business in the best position to achieve its overall objectives.