Why Having a Business Plan Is Key to Successfully Raising Seed Capital As a Startup


Vision alone will not get your startup off the ground, nor is it going to get investors or lenders enthused about giving you seed capital. Unless you’re planning to self-fund the project, or have family and friends who can provide financial assistance, you’ll need to have a business plan in place.

The most important element of a business plan is that it illustrates why you’re a good investment. Therefore, it must show the following:

1. You’ve Thought About The Concept As A Practical Business

A great business idea is just a concept that floats about until it’s expanded upon and documented. The idea genuinely could be the next best thing since sliced bread, or a revolutionary as the electric car. However, without a solid plan for taking it from concept to fruition, how will you know for sure?

A business plan takes an idea and shows you, and any potential seed investors, how you will practically go about getting into the market. It’s essentially a road map that dictates the direction needed and the milestones along the way. You can lay out the practical steps for building prototypes, testing the market, working out cost versus price, and how you’ll sell to the public.

2. You’ve Done Your Homework About The Market

If no one is willing to pay for what you’re selling, then what might seem like a great business idea initially isn’t a marketable option. A major element of any business plan is researching your market and working out who your customer base will be. You must also look at any competitors that might offer the same product or service, or something similar.

If the market is already saturated with similar concepts, you need to have a very good reason to proceed. Your business plan can help you determine how to differentiate yourself, and make customers interested in you, over a competitor.

3. The Numbers Back Up Your Theory

No business can get off the ground without a little bit of seed capital. There’s always a cost involved—renting or buying premises, building a website, creating a product, marketing your business, and other associated expenses.

In your business plan, you need to include a realistic breakdown of these costs. You can then use these figures, plus the research you’ve done into your market, to work out how you’re going to price your product or service.

This train of thought will show you how long it’ll take your business to become profitable and what your profit margins will be. No serious investor or lender will even consider giving you the seed capital you need to get started without this breakdown.

Any startup that aims to achieve success needs a business plan, and whether it’s securing seed capital or planning the way forward, this document should be well researched and carefully put together.

Once the startup has gotten off the ground and gained traction, the plan can be referred to in the future, updated to reflect and map growth, and possibly even utilized to secure further funding.

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