The Golden Rules for Picking the Right Investment Area for You (and Your Business)

Why CEOs Are Terrible Investors 

There’s a paradox I’ve observed over forty years of backing 20+ companies. The skills that make you brilliant at running a business often make you terrible at building wealth outside it.

First of all, let me acknowledge the elephant in the room. CEOs get bored easily. You’ve spent years mastering your industry, and the temptation to try something completely different is great. “I’ve conquered property development, now let me try restaurants!” This is precisely when entrepreneurs move from their lane of expertise into disaster territory. Investing in businesses they don’t understand and have no right to be involved in.

I know because I did exactly this. After taking my recruitment company public, then selling it fora 10x return, I assumed I had the Midas touch and invested in a group of fish restaurants that needed turning around. I failed. The problem wasn’t the restaurants—it was me. I didn’t know what I was doing. The business went bust, and many people lost their jobs. It wasn’t my finest hour and was an expensive lesson I won’t repeat.

When you’ve spent decades building expertise in your industry. You understand the nuances, the players, the opportunities invisible to outsiders. Yet when it comes to investing, you suddenly decide you want a shiny new train set and assume you’ll be able to drive it as well as Thomas the Tank Engine.

This is insanity.

Be ruthless about the investment timeframe 

CEOs are trained to hold, nurture and believe in a long-term vision. That perseverance is admirable in your core business. However, when it comes to wealth building outside of it, that belief can be disastrous.

Private equity companies have learned this to their benefit over the years. Most of the levers that can change the fortunes of a business can be pulled in the first 3-4 years. After that, you’re fighting diminishing returns. Then there’s management fatigue to think about.

When you’ve been running hard for three years to transform an asset, your top team can become exhausted. The easy gains are extracted. Market conditions may have shifted. Critically, your capital is trapped when it could be put to work, engineering more growth in a fresh opportunity. Sell to keep score, don’t fall in love with your investments, even though you may feel proud of them. They’re not your children.

I left £18m on the table once, by not selling a tech business at the top of the cycle. Even though I eventually sold it for a good profit, I wasted ten years of my life trying, in vain, to build the value back up to the level of its former glory. I was a busy fool. Systematic wealth creation, comes from multiple consecutive doubles, not hoping for one spectacular hold.

Add Leverage (But Not Too Much) 

This is where the mathematics becomes interesting. Each deal is different, but I have learned over time that the optimal leverage point is 66% debt to 34% equity. Enough to make doubling your investment easier, but not so much that you’re underwater if things don’t work out as you’ve planned. Things never work out quite as you’ve planned!            This way, you’re using other people’s money to double your stake faster.

Adding Value – Not Hope 

Wealth creation isn’t a spectator sport where you buy an asset and cheer along from the sidelines, hoping you’ll win, like a football game you attended. You have to engineer the increase. Pick an asset where you can add value. Change the management team, increase the prices, cut costs, introduce new products, sell into new areas.

Do whatever it takes, but have some idea of your plans before you write the completion cheque.

Stay In Your Lane 

Most CEOs already know how to add value to their core businesses. The skill is transferring that operational excellence to other investments. What improvements can you drive that others can’t see?

Your wealth-building should leverage exactly the same expertise that built your core business. Tech CEOs should buy tech businesses. Property developers should buy undervalued developments. Restaurateurs should stick to what they know.

This is your “unfair advantage” – the insider knowledge that transforms you from passive investor to active wealth engineer. When I walked into acquisition targets, I could spot operational inefficiencies within an hour that sellers had missed for years.

There are always “amazing opportunities” outside your expertise, on every street corner. Cryptocurrency. NFTs. Emerging markets. Data centres in the desert. What’s rare is the deep expertise plus capital.

I’ve watched entrepreneurs who built £50 million businesses lose millions chasing higher returns in sectors they didn’t understand. Meanwhile, the boring, methodical approach of repeatedly making money in areas you deeply understand compounds into generational wealth.

I learned to treat investments like business transactions, not children. Sell to keep score. Lock in gains. Celebrate. Then do it all again.

The CEO’s Competitive Advantage 

You already possess the skills for systematic wealth building. You assess opportunities, implement improvements, manage risk, make tough decisions.

The challenge lies in applying your existing expertise outside your core business with the same rigour you apply inside it.

Pick investment areas based on genuine expertise. Use 66% leverage. Engineer value actively. Sell within three to four years. Stay relentlessly in your lane. Structure for repeatability.

Do this consistently, and you’ll build wealth that far exceeds what your salary, however generous, could ever provide.

In Summary 

The question isn’t whether you can do this. It’s whether you’ve got the mental stamina, patience, and drive to keep doing it again and again.

That discipline, more than any other factor, separates CEOs who build significant wealth from those who simply earn significant salaries.

Written by Gary Ashworth.