Having read several hundred very high quality business plans lately — for judging MBA-level business plan contests at three major business schools — I’m surprised at the plans that call for investment by outsiders but don’t show in the financial projections that the money required as investment will be well spent.
If you’re seeking investment, you should always have a plan that puts the investors’ money to good use. Never ask for investment when the projected cash flow doesn’t show that you really need it. Always show a use of funds table that gives the would-be investors the satisfaction of knowing that their money, if they invest it, will really contribute to growing the value of your company.
Don’t be the entrepreneur who asks for investment because he or she wants peace of mind, or somebody said they should have something put aside for unforeseen expenses. Investors always have the option of minding their own peace of mind instead of yours. Show them how their money is needed, and that it will make them more money.