One of the biggest mistakes early stage companies make is confusing the need for more customers with the need for more cash. It’s a very common misconception, and one I encounter all the time as a business coach. It often happens when the founders hit a wall with the company’s growth, and the only solution they can see for getting to the next stage is raising more money for things like bigger space, more staff or more equipment.

I’ll sit down with these entrepreneurs and managers to talk about their long-term strategies and growth plans, and I hear something like this: “We’ve got a great product. It’s going to change the world. But we just can’t get it off the ground, so we need a bunch of money so we can buy all the things we need to be successful.”

When I hear that there is a problem with the company that can only be solved with a bunch of money, that’s when the red warning flags begin to wave inside my head. It’s a flawed premise. No matter how terrific your product or service is, you still need to have a strong business model to be successful in business. Cash alone isn’t enough to make that into a reality.

To put it another way, cash doesn’t equal customers.

A company can raise millions of dollars, spend every penny of it on developing the product and the business, and still go bust in a matter of months. The cash didn’t save them, it just distracted them from addressing the underlying issues. In the end, the company and their investors are no better off than if they had just made a big pile out of all that cash in the company parking lot, and then set it on fire.

I’m not saying cash isn’t important, nor am I saying that outside investment is a bad thing. Having spent time in private equity and raising capital for my own ventures, I’ve seen firsthand just how transformative cash can be to a business if it comes at the right time and is used in the right way. My point is that cash by itself isn’t the complete solution.

What is the solution? Professionalization. When an outside investor decides to work with a company, it’s almost always accompanied by a variety of other agreements and conditions. One of the very first things these investors do is look for areas in the business that can be improved. The more efficiency and capacity they can add to a business, the higher their return will be.

Given that most small businesses aren’t created by salespeople, it’s very common for sales and customer acquisition to be among the weakest parts of a new business or startup. This weakness is something that venture capital firms and private equity groups specifically look for, as it is one of the first things that needs to be fixed in the professionalization process.

The more professionalized your sales, the easier it is to grow your customer base and generate more cash. This has the added benefit of demonstrating that your company has traction, something that makes outside investment much easier to acquire.

One of the biggest problems with raising investment money is that it requires a substantial investment of time. Every moment spent looking for potential investors, preparing presentations and meeting with decision makers is time spent away from your business. Now imagine if you spent that same time actively developing your sales processes and bringing in new prospects into the sales pipeline.

In part two, I’ll share a real-world example of this exact situation from one of the companies I work with.