Think like an owner: three principles before committing capital or time

Soldatovic Holding Co. is a family firm that builds and funds businesses. People often ask us how to make the same choice. It may be a young person with savings, a founder who may spend two years on an idea, or a leader weighing an equity offer. The urge to act fast is strong, and success stories tend to praise speed.

Benjamin Graham wrote that investment works best when treated as a business. He made that point long before today's technology. Three rules follow from it. We use them for our own money and time.

1. Know the business well enough to run it

Do not commit to a venture you could not, in principle, operate. Before putting money or years into a startup, a product, or a project, ask: if I had to produce this and sell it myself, would I understand it well enough to do so?

This matters most in a field you do not know. Basic knowledge of AI, energy, or farming does not show where the sector earns money. You must know who pays, what they buy, the margin, and what can fail. We fund sectors where we have run the work, or we learn them before we commit.

2. Never delegate without oversight

Your money or work may sit in the hands of a co-founder, manager, adviser, or fund. You should know enough to check their choices and have sound proof of their skill and conduct. Both are best.

Trust without checks is not a plan. Before you commit, decide what you will see, how often you will see it, and what you will do if the work goes wrong. If you cannot judge a person's choices, check their record, incentives, and rules. Do not assume they match yours.

The same rule shapes our client work. A named founder owns the result, and the client sees working proof every few weeks. We ask clients to apply the same checks we use for our own money.

3. Never commit without a rational expectation of return

Building or funding a business calls for facts, not hope. Before you commit, do the sums:

• · Is there a real prospect of profit, or only momentum?
• · Do I understand the downside as well as the upside — what is lost if this fails, and how likely that is?
• · Am I deciding on evidence, or on how the decision makes me feel?

Walk away when the likely gain is small and the loss could be large, even if the story sounds good. We grew our firm through measured risks and a long view. Some offers we declined went on to work. More of them failed.

The underlying idea

Each commitment of money or time is a stake in a real business that must work. Think like an owner. Learn the business, check delegated work, and seek a return that fits the risk. These rules will not make every choice right, but they can help you avoid many poor ones.

• · Benjamin Graham, The Intelligent Investor (1949; revised editions to 1973) — the principle that investment is most intelligent when it is most businesslike is stated in the book's final chapter.

• · Technical due diligence: what to look at beyond the code Technical due diligence: what to look at beyond the code
• · Preparing a technology company for a funding round Preparing a technology company for a funding round