Business Owners: Investing Beyond Your Own Company

By Jeff Wetta

Business owners often face opportunities to invest in other businesses, whether those ventures are within their own industry or in unrelated markets. While these opportunities can be rewarding, they also come with unique challenges. It is essential to understand the distinction between investing for strategic alignment with your current business and investing solely for financial return.

Strategic vs. Financial Investments

A strategic investment supports your existing business. It may strengthen your supply chain, open a new distribution channel, or expand your services. The return on these investments is often measured in terms of competitive advantage, efficiency, or long-term positioning, rather than just profit. For example, acquiring a stake in a supplier can help stabilize pricing and availability, while investing in a complementary service may deepen customer loyalty.

Financial investments, on the other hand, are judged purely on return and risk. They diversify your wealth outside your business, often in industries unrelated to your own. Here, emotion and alignment matter less than fundamentals, such as cash flow, margins, market position, and management. Both types of investments can create wealth, but they serve very different purposes. Clarity on what you are pursuing helps set the framework for evaluation and decision-making.

Who Should Manage the Process?

It is natural to lean on your CFO, but remember that their focus is safeguarding and optimizing the financial health of your company. Asking them to manage outside investments can stretch resources and create conflicts of interest. For this reason, many owners rely on outside CFOs, investment consultants, or advisory boards. An external perspective not only preserves your internal team’s focus but also brings objectivity to the process.

Who Should Evaluate the Investment?

Every entrepreneur sees opportunity; fewer see risk with equal clarity. Independent evaluation is critical. Engaging outside analysts, accountants, or due diligence firms ensures the investment is assessed for what it is, not for what you hope it will become. A disciplined review should cover not only financials but also leadership capability, industry trends, and competitive pressures. The goal is not to avoid risk entirely but to enter with eyes wide open.

How Should You Invest?

The structure of the investment deserves as much attention as the decision itself. Borrowing to invest can amplify returns, but it also exposes your core business to additional risk. Equity investment preserves independence but ties up capital. In some cases, hybrid approaches, such as convertible notes, allow flexibility. The right choice depends on your balance sheet, liquidity, and long-term strategy. What matters most is that the financing structure prioritizes protecting your operating company above all else. Another fundamental question is what structure or entity I should hold the investment in.  Should you start another LLC?  Should it be owned by your trust or an Irrevocable trust?  How do I manage risk to my family and business if it is owned in my name or the business name?  The ownership structure is just as, if not more, important than the financing, especially with taxable estates.

Should You Bring in Partners?

Partnerships can make significant investments possible and spread risk, but they also require alignment on vision, governance, and exit strategies. A well-drafted agreement is not merely a matter of legal protection; it is a blueprint for how decisions will be made when challenges arise. Many partnerships falter not because of poor investments, but because expectations were never clearly defined at the outset.

Final Thought

Owning a business gives you a unique vantage point. You understand the mechanics of growth, the importance of cash flow, and the reality of execution better than most investors. But that advantage only holds if you approach outside investments with the same discipline you apply to your own company. Decide first whether you are investing to advance your business or to build your wealth, surround yourself with independent specialists, and structure your commitments to protect the enterprise you’ve already built.

Great opportunities come and go. The best ones are those pursued with clarity, discipline, and purpose.