The Portfolio Approach: Managing Multiple Bets, Killing Fast, Prioritizing by Expected Value

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You're not building one product. You're managing a portfolio of bets.

As an indie founder, you might be tempted to go "all in" on a single idea. But that's a risky proposition. What if that one idea fails? What if the market shifts and your product becomes irrelevant? What if you run out of steam or funding before you can validate and build it?

At our company, we've adopted a more systematic approach to product creation. We don't just chase the latest trends or build what we think is "cool." Instead, we manage a portfolio of product bets, constantly evaluating and re-prioritizing our ideas based on clear, data-driven criteria.

In this article, I'll share the framework we use to score, prioritize, and manage our product portfolio. I'll explain how we apply portfolio theory to SaaS, how we allocate resources based on expected value, and how we ruthlessly kill ideas that don't meet our bar. By the end, you'll have a practical, evidence-based system for building multiple products systematically, not emotionally.

Portfolio Theory for SaaS

The core idea behind our approach is simple: Don't put all your eggs in one basket. Diversify your product portfolio to reduce risk and increase your odds of success.

This is a well-established principle in finance, known as Modern Portfolio Theory. The basic premise is that by investing in a diversified portfolio of assets, you can achieve higher returns with lower risk than by investing in a single asset.

The same principle applies to building SaaS products. Instead of pouring all your time and resources into a single idea, you should manage a portfolio of bets, constantly evaluating and re-prioritizing them based on clear criteria.

But how do you actually do that in practice? That's where our Portfolio Scoring System comes in.

The Portfolio Scoring System

At the heart of our approach is a 0-40 point scoring model that evaluates each product idea across five key dimensions:

Expected Value (0-10 points): The probability of success multiplied by the potential impact (i.e., MRR).
Desirability (0-8 points): The strength of the demand signals and validation test results.
Durability (0-8 points): How likely the product is to still matter and keep paying 12-36 months from now.
Moat (0-8 points): The potential to build a sustainable competitive advantage.
Expansion (0-6 points): The ability to grow revenue per customer over time without increasing acquisition costs.

Here's how it works in practice:

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Every time we come up with a new product idea, we score it using this framework. Ideas that score 30 or above are considered "top priority" and get immediate resource allocation. Ideas in the 20-29 range are "high priority" and get allocated resources when available. Anything below 20 gets deprioritized or killed.

The key is to be ruthless and honest. We don't let ourselves get attached to ideas that don't score well. If an idea has a low expected value or a shaky moat, we kill it fast and move on to the next one.

Resource Allocation by Expected Value

Of course, scoring ideas is just the first step. The real magic happens when we use those scores to guide our resource allocation.

Rather than dividing our resources equally across all our product bets, we allocate them based on expected value. The higher an idea's score, the more resources we dedicate to it.

This might mean spending more time and money on validating and building the top-scoring ideas. It might also mean killing lower-scoring ideas quickly to free up resources for the winners.

The goal is to maximize our chances of success by doubling down on the opportunities with the highest potential upside. We'd rather have one or two home runs than a bunch of singles.

Here's a real-world example of how this plays out:

[EXAMPLE] When we first started, we had a bunch of product ideas that all seemed promising. We scored them all using our framework and found that one idea - a workflow automation tool for small businesses - scored a 35 out of 40.

Another idea - a personal finance app for millennials - scored a 22.

Based on those scores, we decided to put the majority of our resources into validating and building the workflow automation tool. We spent several months doing in-depth customer interviews, prototyping, and running beta tests. Once we had strong validation results, we moved it into active development.

Meanwhile, the personal finance app got a lower priority. We did some lightweight validation, but didn't invest heavily in it. After a few months, we decided to kill that idea altogether and redirect those resources to the workflow automation tool.

The result? The workflow automation tool is now our flagship product, with over $50k in MRR and growing. The personal finance app never made it past the validation stage.

Killing Fast, Doubling Down on Winners

One of the key principles behind our portfolio approach is "killing fast." We don't waste time and resources trying to salvage ideas that just aren't working.

As soon as an idea falls below our minimum scoring threshold, we shut it down. We cut our losses, learn what we can, and move on to the next opportunity.

This ruthless "kill fast" mentality serves two purposes:

It frees up resources for our winners. Every hour we spend trying to revive a failing idea is an hour we could have spent doubling down on a high-potential product.
It keeps us honest and objective. When we're emotionally invested in an idea, it's easy to rationalize and make excuses. The scoring system forces us to be cold, hard, and data-driven.

Of course, killing ideas isn't easy. We've had to shut down several projects that we were initially excited about. But in the long run, it's the best way to build a sustainable, high-growth SaaS business.

Practical Application

So, how can you apply this portfolio approach to your own product creation efforts? Here are the key steps:

Identify your product ideas. Start with a list of all the potential product opportunities you've been considering.
Score each idea using the 5 criteria. Be honest and objective. Don't let yourself get attached to any one idea.
Allocate resources based on expected value. Prioritize your top-scoring ideas and dedicate the majority of your time and money to them.
Kill ideas that don't meet the bar. As soon as an idea falls below your minimum scoring threshold, shut it down and move on.
Continuously re-evaluate and adjust. Your portfolio should be a living, breathing thing. Regularly re-score your ideas and shift resources accordingly.

To help you get started, here's a [LINK] template you can use for your own portfolio scoring and management.

Discussion

Of course, the portfolio approach isn't a silver bullet. There are some important trade-offs and limitations to consider:

Trade-offs:

It requires more upfront work to score and prioritize ideas.
It can be emotionally difficult to kill ideas you're attached to.
It may mean slower progress on any single product in the short term.

Limitations:

The scoring system is subjective and can be biased.
Market conditions can change quickly, rendering your priorities obsolete.
You may miss out on serendipitous opportunities by being too systematic.

Ultimately, we believe the benefits of the portfolio approach outweigh the drawbacks. By managing multiple bets and ruthlessly killing low-potential ideas, we've been able to build a more sustainable, high-growth SaaS business.

But it's not a one-size-fits-all solution. You'll need to experiment and adapt the framework to fit your specific context and goals.

Takeaways

Here are the key takeaways from our portfolio approach:

Diversify your product portfolio to reduce risk and increase your odds of success.
Use a systematic scoring system to prioritize your ideas based on expected value, desirability, durability, moat, and expansion potential.
Allocate resources based on those scores, doubling down on your highest-potential opportunities.
Kill ideas quickly that don't meet your minimum scoring threshold, freeing up resources for your winners.
Continuously re-evaluate and adjust your portfolio as market conditions and your own capabilities evolve.

What if you could manage multiple product bets systematically, not emotionally? Give this portfolio approach a try and let me know how it works for you. I'm always eager to learn and improve our process.

And if you have any questions or want to discuss further, feel free to reach out. I'd be happy to chat more about our journey and how you can apply these principles to your own product creation efforts.