Making business investments

and our current soft market

I.C.E. stands for:

Impact

Confidence

Ease

And it’s about all you need when developing a framework for making operating investment decisions in a business.

The insurance industry is currently softening after a multi-year hard market following COVID - which means every executive is currently deploying excess capital in the most efficient way possible.

For those not familiar with insurance cycles, it’s quite simple… the industry will move between hard markets and soft markets. A soft market is where margins are favorable and it’s time to grow. A hard market is where margins are thin and it’s time to increase rates on policyholders (which triggers shopping).

Reinvesting profits into growth is a muscle we haven’t used in a while, but is quickly becoming critical to being a value-added finance leader in the industry in 2025+ like it was pre-2020.

And I want to share with you my simple framework for driving better investment decisions.

Let’s jump in!

Step 1: Determine excess and goals

I want to illustrate the foundation of my investment framework with a personal example…

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I moved into a new house about 18 months ago - well, the house is new to me. It was built in the 1960’s and the wallpaper in the bathroom is original to the house.

Meaning my wife and I have a lot of work to do to make this our home. I estimate we could probably spend $200k on additional updates to finally get it into a place where we want it.

But I don’t have $200k extra lying around. So I have to determine exactly how much I feel comfortable spending on home upgrades in light of all our other competing priorities (not living through construction 24/7, wanting to save a certain % of salary, travel to see family, emergency savings, endless kid stuff, etc.).

My first step in understanding exactly how much I could spend every month/quarter is by building a personal budget and forecasting my financials and every dollar in/out of my bank account (you better believe I have a killer model for this).

This shows me exactly how much investible capital we have and I can determine how much I want to invest in home improvements versus our other goals.

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It’s that simple. And businesses should work the same way:

1. Build your 3 year financial model

2. Determine how much investible capital you have

3. Figure out how much you want to reinvest in the business to accelerate your goals

This is why I harp on accurate forecasting. If you mess this step up, you’ll find yourself going from $20M investible capital in your April forecast, allocating $15M of it to a new growth investment, then finding out that terrif impact you modeled was woefully short of expectations and you only have $5M in investible capital when you update your forecast in June... oops!

Believe it or not, this is the easy part…

Step 2: Score, rank, and decide

This part is often political or at least needs to be governed by a committee (if people are indecisive).

But at the heart of this step is simply collecting business cases from leaders, scoring them on a framework (more on that in a bit), then making a decision.

At the heart of this, you’re asking for peoples’ best ideas - then you are going to tell 75% of business leaders that their ideas suck.

Or at least are not good enough compared to the others.

You’ll pick a few ideas to either test, pilot, or implement completely based on risk tolerance and the nature of the idea.

And you’ll know which you want to do by going through the I.C.E. framework:

My framework: I.C.E.

As with everything I do, I am borrowing this framework from others (not sure exactly who started it, but I recently heard about it from Alex Hormozi).

And I like starting here due to it’s simplicity.

I mentioned it in the beginning: ICE stands for Impact, Confidence, Ease.

Meaning every business investment opportunity should be scored along those 3 dimensions.

Let’s jump into each one…

Impact

This is clearly the most critical - it drives the connection between what the business case is for and why anybody should care.

This is where you bring in any objective metrics like your IRR, break even, % growth increase, etc.

For me, I like to keep it simple closer to the business - showing incremental sales, income, or whatever KPI aligns with corporate goals.

If the intent is to max out the bonus by hitting a certain policy growth number - then simply show how many policies each initiative will add.

Likely you’ll need to show impact across a few KPIs or dimensions because no initiative is every black or white.

I probably need to write an entire post on determining the Impact of an initiative because there is so much that goes into it and finance is a heavy input to the quality of it. I’m talking about calculating the incremental impact of more, how to using testing/pilots to de-risk an investment decision, etc. Let me know in the comments if you want this (I might just do it anyways).

Which brings us to our next letter in ICE…

Confidence

This can also be called “variability” or “likelihood of achievement” and gives context to your impact.

Similar to evaluating the return on a stock price, you’ll want to accurately show the Impact adjusted for risk and in relation to the risk-free option (i.e. your risk adjusted return).

Many moonshot actions (acquiring a competitor, launching a new product, etc.) will rank high in your Impact score due to raw potential, but may have an 80% likelihood of no return.

Which would really suck if you spent years betting on that thing to come through and had 200% sales increase built into your forecast with 100% certainty in 2026…

Ease

And that’s why it also matters how much effort something will take.

A guaranteed 6% boost in new sales with very little effort (flip a switch) and no risk of adverse impacts is probably where most of your money should go.

Compare that against a new product launch that will require massive amounts of research, expensive consultants, tech abilities you don’t already have, etc. but has a potential to return you 20% boost in new sales with perfect execution.

Don’t overengineer

Here’s my practical advice after spending hours trying to develop the perfect scoring model for investment opportunities…

Don’t overengineer this.

Business is inherently messy and subjective.

Even the well-oiled monstrous companies rely heavily on instinct, but guided by data.

Which is what we’re aiming for in finance…

Guiding the decision with data.

So resist the urge to give each dimension a score, develop a weighted average IRR based on probabilities of outcomes, model payback periods to the penny, etc.

Instead, take a few big shots at I.C.E.

Maybe add your own letters for more flavor.

Give the business leaders your opinion.

Then force the room to make some decisions.

Oh, and don’t forget to measure outcomes 3, 6, and 12 months later against original expectations. They said sales would increase 5% - is that holding true?

Then repeat the whole process again with fresh business cases (this part is important since initiatives often overlap).

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Whenever you are ready, check out a few of my comprehensive playbooks:

1. The FP&A OS documents exactly how I build and improve FP&A teams.

2. The Finance Manager Playbook is my resource (with templates) on how to manage a high-performing finance team.

Thanks!

Brett Hampson