I remember years ago, I met with a gentleman who believed he had a promising business opportunity tied to a piece of land. He had already borrowed money against the property, and now he was hoping to attract investors to pay off his debt and help him launch his idea.
On the surface, this might sound like the beginning of a great entrepreneurial journey. But there was one big problem: he had no plan. https://youtu.be/w0pJN4QB6Jk
The Investor’s Checklist
If you’re seeking outside capital, investors want to know four simple things:
How much money do you need, and what will it be used for?
What’s the worst-case scenario, and what’s your Plan B?
What kind of return or cash flow can they expect?
How secure and sustainable is that return?
If you can’t answer these clearly, you’re not ready to pitch.
The Danger of Going Out Too Soon
In this case, the entrepreneur couldn’t answer basic questions like:
What equipment do you need?
What are your expected sales and terms of payment?
How long will it take customers to pay you?
He assumed everyone would pay in cash—yet his market (the construction industry) typically runs on progress payments and holdbacks. That means he could be waiting 90–120 days to collect. Without a sales forecast, he had no idea how much capital he would need to finance receivables.
If he rushed out to pitch with this half-baked story, he’d risk burning bridges with the very few people in his network capable of writing six-figure checks. Once you make a poor first impression, it’s much harder to come back later with a polished plan.
Build a Plan for You, Not Just the Investor
Too many entrepreneurs treat business plans like marketing documents—something designed to convince banks or investors. That’s a mistake.
The real purpose of a business plan and cash flow forecast is to show you whether the business is actually viable. If the numbers don’t make sense on paper, they certainly won’t work in real life.
Creating rosy projections without a foundation in reality isn’t planning—it’s salesmanship. At best, you’ll waste time. At worst, you’ll come across like a con artist.
The Bottom Line
Before you ever approach investors, make sure you can clearly answer the four questions above. Build a plan, test your assumptions, and stress-test your numbers.
When you finally do sit down with potential investors, you want to look prepared, professional, and credible. That way, your enthusiasm will be backed by a solid story that makes sense—not just excitement and hope.
If you’re serious about buying or selling small businesses, check out: My Business Buyer Advantage course at BusinessBuyerAdvantage.com
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