In today’s investment landscape, businesses are eager to secure capital, and Funders are eager to deploy it. Yet, despite the apparent alignment, money doesn’t always flow freely. The reason isn’t always market conditions, risk appetite, or economic cycles. More often, the underlying issue is surprisingly simple:
Businesses struggle to articulate how they will operate, and Funders struggle to translate financial model assumptions to their clients so that they can meet risk parameters and release funds.
When this happens, frustrations occur on both sides of the fence. The business feels as though Funders are strangling them of cash flow, and Funders cannot release funds to achieve their IRR projections.
I have worked in several businesses that have funding or factoring facilities in place, and the above is not uncommon. Let’s break down why it happens and how to fix it.
The Business Side
Many founders and management teams understand their businesses intuitively. They can explain the vision, describe the market, and talk enthusiastically about the opportunity.
But when Funders ask for the operating plan behind the numbers with specific Key Performance Indicators (KPIs): how customers are acquired, how delivery works, how staff are scaled, or which processes drive margin, the conversation becomes abstract.
Typical symptoms include:
Overly high-level strategy documents
These outline goals, such as “We will expand into three geographical regions.” This is a valid North Star, but the business then has to articulate the mechanics and milestones, who is going to drive this, and what markers along the way will signify progression or success.
Financial models built before the operating plan
Instead of the model emerging from operations, operations are backfilled to justify the model. This causes friction as staff must adapt to new ways of working. When change occurs, productivity often dips until the new approach embeds, or, in a worst-case scenario, production stops because the operating model is rejected. When this happens, information flow grinds to a halt, and Funders sense risk immediately.
Unvalidated assumptions
Conversion rates, unit economics, capacity, and pricing are often based on optimism rather than evidence.
Little or no process documentation
Without codified operations, workflows, responsibilities, and systems, a Funder can’t evaluate scalability or risk.
The result is a plan that sounds promising but doesn’t demonstrate operational credibility.
The Funder Side
On the other side of the table, Funders face their own challenge: they’re given a financial model full of assumptions they can’t connect to the real world. They see outputs, revenue, EBITDA, cash flow, but they cannot trace the path from business activity to financial outcome.
Funders often struggle with:
Translating assumptions into operational reality
A model may assume 100 new customers per month, but the Funder has no clarity on:
- How many leads are needed for that
- What conversion rate is realistic
- How many staff are required
- What infrastructure must be in place
Assessing execution risk
Without an operating roadmap, even a sound model feels speculative.
Understanding the operational chain
Funders want to know every revenue number has a corresponding operational action. When that chain is invisible, confidence drops.
Aligning capital to operational triggers
Funders prefer releasing capital based on milestones. Without a clear operating plan, milestones cannot be defined or verified.
Even when a business has strong potential, Funders hesitate because they cannot see how the numbers will be achieved.
Capital Release Breakdown
This disconnect creates a predictable deadlock:
- Businesses present financial outputs without operational evidence.
- Funders request clarity the business cannot provide.
- Both sides grow frustrated.
- Capital remains on the sidelines.
It’s not that the business is flawed or the Funder overly cautious; it’s that the narratives they use are lost in translation. The business speaks in vision and numbers; the Funder speaks in risk and operational mechanics.
Until both parties speak the same operational language, progress stalls.
How to Fix the Gap: Building an Operating Plan That Unlocks Capital
Closing the operating plan gap requires intentional effort from both sides.
For Businesses: Build a Model-Driven Operating Plan
A credible operating plan should include:
- Customer acquisition pathways with assumptions tied to data.
- Unit economics with a breakdown of cost drivers.
- Operational capacity planning: headcount, tools, systems, processes.
- Delivery workflows showing how customers move through the business.
- KPIs and milestones are tied directly to the financial model.
- Risk mitigation strategies demonstrating awareness of vulnerabilities.
Businesses and Funders should jointly document the process and requirements needed to achieve a drawdown, including timeframes.
When the operating plan and financial model mirror each other, investors gain confidence.
For Funders: Translate Assumptions into Operational Questions
Instead of only interrogating the numbers, Funders should ask:
- What process generates this outcome?
- What capacity is required to support this projection?
- What evidence underpins the assumptions?
- What milestones must be hit before releasing capital?
- How does each part of the model link to real activities inside the business?
This approach shifts evaluation from scepticism to insight and helps Funders determine where capital is safest and most effective.
The Outcome: When Both Sides Align, Capital Flows
When businesses articulate how they operate and Funders translate financial assumptions into operational reality, something powerful happens:
- Uncertainty decreases.
- Risks become measurable.
- Milestones become clear.
- Trust increases.
- Capital gets deployed on a regular basis.
Having someone in the organisation who understands both sides of this equation, someone who can act as a translator, helps enormously. Once a common way of working is documented and embedded, traction follows and the foundations of a long-standing partnership are formed, helping both business and Funder fortify against future risks.
Who’s behind this post?
Chris Johnson
Director & Co-Founder
Chris Johnson is a Chartered Legal Executive and Co-Founder of Arx Nova. He specialises in legal risk, governance, and business restructuring during periods of instability. With over 17 years of experience across the legal and professional services sectors, Chris supports leadership teams to regain control, navigate complexity, and stabilise quickly.
