Say one person comes up with the idea for a startup, and spends a significant amount of time over 2 years developing the business plan. That person then asks others to join the startup as co-founders to help build the startup.
When allocating equity to each co-founder, how much equity is that existing business plan worth?
The person who wrote the business plan is the startup's CEO.
The business revolves around a website marketplace.
The business plan includes:
The other co-founders are the CTO, the front-end designer and coder, and the artist.
Honestly? Between zero and maybe 5% of the initial shares -- and 5% is on the high end, for a really extraordinarily good effort. In most cases, I would say a business plan is worth nothing at all.
By business plan I assume we mean ... the usual business plan. 10-15 pages of text with good market research, a loose idea about what the final product should look like, a pretty good expenses forecast, and dreams about funding and income.
Now, if the business plan actually contains what Lean Startup practitioners call "validated learning" and even has some pilot customers lined up, then it might be worth more.
If you're going into this as a founder, then you should look to justify your share allocation based on the value you're bringing to the startup going forward. Not on a business plan, which is a piece of paper which will soon need to be changed.
Two years on a business plan is... Wow. Mind-boggling. I can't imagine how far you'd be by now if you'd actually executed.
IMO, business plan preparation is worth near to nothing with respect to common stock distribution amongst founders. Primarily because the plan shifts often in most startups. However, maintaining and executing against a current, loose business plan is worth something, though, and the two should not be confused. (Also, the vision is worth something too. The individual(s) who came up with a well-conceived, original idea should get some recognition for it in the distribution.)
I think there's a kind of weird collective behavior I've seen in almost anyone I've worked with: Most people I've dealt with expect a business plan, but put no faith in one, for a variety of valid reasons. Never figured out why, but I do call it the "Safety Blanket Principle"...