Today I’m following up on a question I received after my recent video about Equity Financial Partners:
“How do I make my deal look better so people will want to participate?”
Let’s break it down. https://youtu.be/rIK4wV4VBEo
The Key: How Are You Using the Money?
The single most important factor is how the funds will be used. Investors want to know that their money is going toward something durable and tangible, not just a hope or a promise.
Here’s a story from my past:
Years ago, I spotted a piece of land suitable for a mini storage project.
I wanted to raise money without being personally on the hook while the business had no income.
I calculated the total funds needed: $50,000 to buy the land, plus cash for operating expenses and the down payment on a building mortgage.
I called nine people I knew, laid out the plan, and raised $80,000. The largest investor put in only $15,000; everyone else contributed smaller amounts.
The plan was simple:
Buy the land with no mortgage.
Build the storage facility using a mortgage once income starts.
Have cash flow from customers to service the debt.
💡 Why Investors Said Yes
Even though the project ultimately didn’t go forward due to zoning and building permit issues, investors were comfortable because:
They trusted me — they knew my track record.
The money was going into something tangible — land and cash in the bank.
Even when the land was later sold, investors recovered about 87¢ for every dollar invested. A partial loss, yes, but confidence in me and the durability of the asset made it a risk they were willing to take.
Applying This to Your Deals
If you’re raising equity to expand an existing business, think about using funds for things like:
Inventory
Equipment
Vehicles
Anything tangible that produces cash.
Avoid asking investors to fund intangible risks like:
New menu creation
Marketing campaigns
Why? Once that money is spent, there’s nothing left to liquidate if the project fails.
Equity vs Debt
Durable assets can often be financed with debt, backed by the asset itself, giving the investor lower risk and lower return.
Equity comes into play for intangible value, like goodwill. That’s much harder to sell to outside investors, and they’ll only invest if they believe in you and the project.
If you struggle to find equity, it may be a signal to re-examine the risk profile of your deal. Investors often see things you may not have fully considered.
Take Action
If you’re thinking about buying a business or structuring a deal, I highly recommend my online course at BusinessBuyerAdvantage.com. It walks you step-by-step through buying businesses the right way.
Already own or run a business? My other program, EasySmallBizSystems.com, shows you how to build a business people will actually want to buy.
👉 Want deeper dives like this? Join my email list at DavidCBarnettList.com for early access to videos, insights, and 7 free bonus gifts.
No comments:
Post a Comment