How to Calculate How Much Money You Actually Need to Raise
- samueljpart
- Feb 26
- 4 min read
Raising investment isn’t just about getting as much money as possible—it’s about raising the right amount. Ask for too little, and you risk running out of cash before your strategy has time to work. Ask for too much, and you could give away unnecessary equity, burden yourself with expectations, or struggle to justify how you’ll use the funds.
So, how do you determine how much you actually need? Your business plan should tell you.
1️⃣ Start With Your Business Plan—Not a Random Number
Your business plan should already outline: ✅ Your growth strategy—where you’re going and how you’ll get there. ✅ Your revenue model—how money flows into the business. ✅ Your cost structure—how money is spent and what changes as you scale. ✅ Your key milestones—what you need to achieve before the next phase of growth.
📌 Before deciding how much to raise, ask yourself:
What exactly will this investment be used for?
How will it accelerate my business beyond organic growth?
When will I need another round of funding, if at all?
🚀 Example: A direct-to-consumer brand wants to raise investment. Instead of picking a number based on "what feels right," they check their plan:
Marketing budget: If we spend £50K on ads, what’s the expected return?
Stock purchasing: If we invest £100K in inventory, how does that impact revenue?
Operations: If we hire a logistics manager, what efficiency savings will that create?
💡 Lesson: Your funding target should be directly tied to planned activities and their expected outcomes.
2️⃣ Use Speculative Forecasting to Test Different Scenarios
The best way to calculate your funding needs is to model different scenarios and see what happens when you apply investment to different parts of the business.
🔹 If we increase marketing spend, what’s the impact on revenue? 🔹 If we invest in new hires, how long before they generate returns?
🔹 If we expand operations, what new costs arise (premises, suppliers, logistics)?
📌 How to do this: 1️⃣ Create a baseline financial forecast (without investment). 2️⃣ Layer in speculative investment (e.g., £50K to marketing, £200K to hiring). 3️⃣ Model the expected return and the time it takes to see that return. 4️⃣ Adjust based on risk factors—do you have enough buffer for delays?
🚀 Example: A SaaS start-up wants to raise £500K to scale sales. Their forecast shows:
£200K for 10 new sales hires—but hiring/onboarding takes 4-6 months before they start generating revenue.
£100K for marketing—with a projected return after 3 months.
£200K for product development—but engineering delays could push timelines back by 6 months.
💡 Lesson: Funding should cover both the costs of growth and the time it takes to see results.
3️⃣ How Long Do You Need to Prove This Strategy?
Even with investment, things don’t happen instantly. You need to raise enough to cover the time it takes for your new hires, marketing, or product improvements to start paying off.
📌 Key considerations: ✅ How long will recruitment take? Hiring salespeople, engineers, or managers takes time. ✅ What’s the onboarding period? New hires don’t generate revenue immediately. ✅ Are there external dependencies? Manufacturing, logistics, and supplier delays all affect timelines. ✅ What’s the realistic payback period? If you invest £100K in marketing, when do you actually see the return?
🚀 Example: A retail business wants to raise £250K to scale. They estimate:
Hiring a marketing manager takes 2 months.
Implementing new ad campaigns takes 1 month.
Sales results won’t be clear until 6 months in.
💡 Lesson: If they only raise enough to cover 3 months, they’ll run out of cash before the strategy proves itself.
📌 General rule: Raise for at least 12-18 months of runway, allowing time for strategies to take effect and adjust based on real-world results.
4️⃣ Are You Running a Sustainable Business?
If your business is already profitable, investment should be less volatile because you’re not relying on it to survive—you’re using it to scale.
✅ Sustainable businesses: Investment allows them to grow faster, but they already have revenue coming in. If things go slower than planned, they can still survive. ❌ Pre-revenue businesses: If the strategy takes longer than expected to deliver returns, there’s no fallback—the entire business relies on investor money.
🚀 Example:
A sustainable business invests £50K in marketing. Even if results are slower than expected, existing revenue keeps the company running.
A pre-revenue startup raises £500K but faces product development delays. No revenue means they burn cash faster than expected and may need to raise more sooner.
💡 Lesson: The more revenue you already generate, the safer investment becomes.
5️⃣ Final Checklist: Are You Raising the Right Amount?
Before locking in a funding target, make sure you can answer:
✅ What will the money be used for? (Specific, not vague "growth" plans.) ✅ What’s the return on that investment? (Does the math add up?) ✅ How long before I see results? (Is my timeline realistic?) ✅ What happens if things take longer than expected? (Do I have a buffer?) ✅ Am I raising to grow—or just to survive? (If it’s survival, rethink your model.)
🚨 If you can’t confidently answer these, you’re not ready to raise yet.
📌 What to do instead:
Work on validating your strategy through an MVP or proof of concept.
Refine your business plan to show a clear link between funding and results.
Consider bootstrapping or revenue funding to reduce reliance on outside investment.
💡 Where I can help: If you need help building an investment-ready business plan, I work with founders to structure financial forecasts, test growth assumptions, and define funding needs.
📅 Book a free 30-min call to explore how to prepare for investment the right way.
Comments