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How Should You Invest Your Next $1,000,000?

Take some chips and focus on testing.

In workshops that I do across the country, I ask participants what they would do with their next $1,000,000 – and how they would split investing it between their business and a mutual fund of their choice.

It’s an important question – because while it’s tempting as entrepreneurs to go “all in” in our businesses, it’s always wise and prudent if you can to take some chips and move them to the side. Trees don’t grow to the sky forever, and despite our businesses being our babies, it is smart to diversify some of the risks.

It’s also important to take the question one level deeper. Let’s say you were to decide to invest $800,000 into your business, and $200,000 into your mutual fund – what should you do with your $800,000?

If you are lucky to have a formula in your business that you know you can make money with, it’s tempting to pour your money into the model, with the hope and intent to “do more of that.”

Putting all your money into “what is working” is also short-term thinking. It’s wise to take some of the chips that you will put into your business, and experiment with speculative and new ideas that will hopefully diversify the model.

Do you have one sales channel that works the best? Do you have one customer that makes up the majority of your sales? Is there one product that is your home run.

We work hard as entrepreneur’s to get to these points. And then when we’re finally there and are making money, we want to keep doing it, and at the same time should be worried about concentration risk. So we need to take some time and money to try new things.

So what would you do with your next $1,000,000? My first suggestion is to take some money and put it on the side and put a good chunk of it in your business. But then go one step further – use the bulk of your money that you are going to put into your business and put it into what is working, and use some of it to try new and experimental ideas.

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