How complete should my business plan be before I approach investors?


I know there are a number of business plan questions already, but my question applies to a specific aspect of the process.

As my partners and I are researching and developing our plan, I've been wondering if having a shining, MBA-quality, seal-of-approval business plan is entirely necessary before we approach Angels and other investors. We're putting a lot of time into this, and as each month passes I'm concerned that someone else will think of our model and beat us to it.

So, my question: How rigorous and thorough should our BP be before we start putting the feelers out? Is 80% there good enough? 90%? Or does it need to be bomb-proof?

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asked Jan 14 '11 at 10:14
180 points
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7 Answers


Empirical evidence of potential success (small case studies/tests) may be more important than a well-constructed plan -- the plan will mature as investors work with you to flesh it out. First, you have to hook them with an idea. At the same time, here are some questions you should make sure you know the answer to before approaching them (forgive the number signposts, it's a bug in stackexchange):

  1. Concept
What exactly is the product or service of the proposed business?
What are the problem & need of the market, solution, and opportunity proposed?
Lead with the most compelling summary of your idea and be direct and specific.
Is it unique? What are the main benefits?

  1. Customers
Who are the potential customers of your business?
What is the size of the addressable market?
Why will they buy?

  1. Marketing
How will you to reach your target customers?
How will you advertise or distribute your product?

  1. Competition
Who are the competitors of your business?
What is your main advantage compared to them?
Why hasn't somebody done this before or what is different about your product compared to industry standard? What do customers use now instead of your product or service?
What stops others from copying you?

  1. Business And Financial Model
What is the proposed business model and how is your business going to make money?
What are the high-level projections for the revenue and cost?
How much money do you need, when, and what for?
When will it be cash flow positive?

  1. Risk factors
What are one or two major risks that can influence your business?
How would you react if these risks occur?

  1. Team
List team members and their short bio/main area of expertise.
Does you team have all the skills it needs to run the business?
answered Jan 14 '11 at 12:15
Henry The Hengineer
4,316 points
  • I would add, exit. – Frank 13 years ago
  • This is great, thank you. Combines Raynaud's excellent advice (stop thinking and do something) with important components of the BP for which we still need to have answers. – Matt 13 years ago


The big buzz these days are that Business plans are for established businesses. Startups are in search of a Business model (see gurus Steve Blank and Eric Ries ).

Steve Blank have some great arguments against the Business plan in startups here.

So, you need to spend some time with is your Business model. Here is a good book about Business modeling.


  • Think long and hard about how you fit in your market
  • Postulate some hypothesis about how your Business model should work
  • ... and test the hypothesis early to be right or wrong.

Document all this and show your investors that you're capable of this very complex process. You'll most certainly not be right the first time, and you shouldn't have to. What's important is that you can work quickly to pivot. Speed is everything in startups.

Best of luck!

answered Jan 14 '11 at 20:17
John Sjölander
2,082 points
  • I like this idea. So many tech startups in the last decade seem to have popped up without any apparent way to make money... I can see how something like this would develop out of that environment. – Matt 13 years ago
  • every minute you spend writing your plan is time wasted from actually building your business. You need to have a general idea, general goals, but writing them down for a small company is a waste of your time. – Frank 13 years ago
  • + 3 for a great answer. xCept i can only vote once – Frank 13 years ago


as each month passes I'm concerned that someone else will think of our model and beat us to it

They will beat you to it, not because they thought of your model, but because they started actually doing something.

Aaron Patzer is famous for saying that adding an MBA to a founding team removes $250,000 from your valuation. That should give you a hint.

Stop thinking about your plan, and start doing something. Then you can credibly pitch to investors, once you can show that "our traffic is up 10% month over month" and "we have committments from a big retail store to use our product as soon as we do XYZ".

What doesn't work is "we think that people will buy our stuff, but we never tried".

answered Jan 14 '11 at 22:00
Alain Raynaud
10,927 points


If you are going to try and impress investers then a business plan is only part of the pitch. You will need to know how to pitch your business plan as well as deliver it on a bit of paper.

Mark Suster is a VC who writes about all this kind of stuff on his blog. He has tons of stuff relating to pitching to investors and what you should and shouldn't do. Take a look, I'm sure you'll find some good information.

Guy Kawasaki is also a great place to look. Check out You Tube for some of his videos. If nothing else, he will inspire you to press on with your idea.

answered Jan 14 '11 at 11:38
Smart Company Software
1,190 points


When beginning to approach investors it is absolutely necessary to have eliminated all of the possible risks that may be associated with their potential investment. What I mean by that is each step you take along the process all the way up to a firm user base or customers purchasing your product eliminates risk from an investors point of view. The business plan is just the first step and assuming this is your first version of it, as you develop your product and begin to "beta" test, it will change more than you probably even realize at this point.

In my experience, the process should be something like this (assuming you have $0 to personally invest):

Stage 1 - Concept/Business Plan with investors consisting of family, friends, self and a company valuation of $250K - $1 million

Stage 2 - Technology is developed with investors consisting of Angels or Seed VC's. The company valuation can be set from $1 million - $5 million

Stage 3 - Launch of product & early customer traction with investors consisting of Seed VC's or a Series A VC. Company valuation set from $5 million - $10 million.

Stage 4 - Scaling & adoption (company has negative cash flow) with investors consisting of Series A/B/C VC's. Company Valuation has huge variability at this point and can be valued anywhere between $15 million - $100 million.

Stage 5 - Rapid & Mass Expansion (positive cash flow). This stage will usually involve an IPO or Exit Strategy Implementation. Obviously the valuation of the company has huge variability at this point.

All of these stages represent a removal in the level of risk involved with an investment into your company. I would suggest using this initial business plan as a frame of reference for your ideas. It should be used to keep you and your partners on track. If your main concern is that you will be beaten to the market then completing what you view as a flawless business plan will only hold you back. Begin product development and if possible complete it as well.

From an investor standpoint, people have incredible ideas all of the time. The hard part lies in executing the technology and implementation of those ideas into the market. If you can eliminate as much risk as possible, not only will you find it easier to locate potential investors, but your valuation will obviously increase and the cost of equity will increase substantially for the investor.

I hope this helps!

answered Jan 15 '11 at 01:47
Robert Dolle
118 points
  • One thing I forgot to add in this post is that if you are still at the idea stage of your business then you should think about trying to acquire a "bridge loan" from your family or friends. If you have any money to invest you should definitely be infusing that into the business as well because investors will definitely want to see if you have taken on any personal financial risk as well. – Robert Dolle 13 years ago
  • Hadn't thought about showing that personal risk part, great point, thank you. – Matt 13 years ago


Whatever it takes to be ready to answer every question in a room full of aggressive investors firing questions at you. The more professional and complete, the better. You don't want investors finding holes in your plan or throwing you off guard by questions.

answered Jan 15 '11 at 04:20
1,747 points


Having a plan is great, but you don't need to have a 100% polished plan to start your business and get to work on prototypes, etc.

Initially, you should be doing just enough planning to get up and running. Then, flesh out your plan as you validate initial assumptions or as your assumptions change. Of course, if you are talking to investors, you will want to have at least your financial model fleshed out so that you have a good understanding of pricing, profitability, forecasted break-even, how much money you think you need, etc. You'll also want to have a solid picture of what your marketing and sales plans will look like. Investors are going to ask about these things and you need to be prepared.

Honestly, it's very possible that investors will never ask you for your actual plan document. All they may want to do is have a conversation, see your prototype, and have you run through a pitch deck. While none of these activities technically requires a business plan, you almost certainly will have had to do some planning to make sure that you are prepared for these activities.

At the end of the day, it's not so much about the document, but about the planning process. You need to go through the process to answer the tough questions about your business and to validate that your business will be a financial success. But, you certainly don't always need a highly polished document. Remember, all plans are wrong. Everything will change as you start selling products and talking to customers. But, the planning process is invaluable and 100% necessary.

answered Jan 15 '11 at 08:23
Noah Parsons
96 points

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