Joint Business Plan

Madhurjya K. Dutta

1mk_dutta Sept 2010

Joint business and partnering

What is joint business• two or more businesses pool their resources and expertise to

achieve a particular goal. The risks and rewards of the enterprise are also shared.

• Joint business also about business expansion, development of new products or moving into new markets, particularly overseas.

What joint business could give you:• more resources • greater capacity • increased technical expertise • access to established markets and distribution channels

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Types of joint business

Depends on what you are trying to achieve.• co-operate with another business in a

limited and specific way• separate joint venture business, possibly a new

company, to handle a particular contract.

3mk_dutta Sept 2010

Joint business - benefits and risks

Businesses of any size can use joint business to strengthen long-term relationships or to collaborate on short-term projects.

A successful joint business can offer:• access to new markets and distribution networks• increased capacity• sharing of risks and costs with a partner• access to greater resources, including specialised staff,

technology and finance• A joint business can also be very flexible.

4mk_dutta Sept 2010

Problems are likely to arise if:

• the objectives of the business are not totally clear and communicated to everyone involved

• the partners have different objectives for the joint venture• there is an imbalance in levels of expertise, investment

or assets brought into the venture by the different partners

• different cultures and management styles result in poor integration and co-operation

• the partners don't provide sufficient leadership and support in the early stages

5mk_dutta Sept 2010

Plan your joint venture relationship

Before starting a joint venture, the parties involved need to understand what they each want from the relationship

Any deal should:• recognize what you each contribute• ensure that you both understand what the agreement is expected to

achieve• set realistic expectations and allow success to be measured

6mk_dutta Sept 2010

Assess a new potential partner, you need to carry out some basic checks:

• Are they financially secure?• Do they have any credit problems?• Do they already have joint business partnerships with

other businesses?• What kind of management team do they have in place?• How are they performing in terms of production,

marketing and workforce?• What do their customers and suppliers say about their

trustworthiness and reputation?

7mk_dutta Sept 2010

Choosing the right joint venture partner

Create a joint venture agreement

Set out the terms and conditions in a written agreement. This will help prevent any misunderstandings once the joint venture is up and running.

A written agreement should cover:• the structure of the joint business, eg whether it will be a separate

business in its own right • the objectives of the joint venture• the financial contributions you will each make• whether you will transfer any assets or employees to the joint

venture• ownership of intellectual property created by the joint venture• management and control, eg respective responsibilities and

processes to be followed• how liabilities, profits and losses are shared• how any disputes between the partners will be resolved• an exit strategy 8mk_dutta Sept 2010

Make your joint business relationship work

• Communication • Sharing information openly, particularly on

financial matters• Establishing clear performance indicators • Flexible relationship.

9mk_dutta Sept 2010

Sample Format

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Outline for a Joint Business Plan

1. Executive Summary

Include a summary of the discussions to capture the investor’s attention, the summary should be no longer than 1-2 pages.

2. General overview

Outline the nature of the business, the location, the finance requirements, the time frame required to establish the venture, and the duration of the venture if it has a limited life (e.g. a supply contract)

3. Core business

Outline the core business of the joint business partner(s) and explain how the proposed enterprise is compatible with their current operations. If the business is in a new industry, the plan must outline the reasons for the diversification

11mk_dutta Sept 2010

3. Business overview

It should contain details about you and your joint business partner and include a biography of experiences and expertise.

• In what industry does the business intend to operate?• Who are the competitors?• Have any other businesses recently entered or exited the

industry?• How will the business be profitable, and what are the growth

opportunities?

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4. Product or Service Line

• Describe specifically what your joint business will do. What product or service will be provided?

• Are there any unique features or benefits of your product or service?

• Describe the benefits. That is, what will the product do for the customer?

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5.Management• Who will manage the overall operations of the Joint Business?• What will be the specific duties?• What other employees will be required and for what purpose?

6. The Market

To be specific about your marketing strategies and goals, as well as how you and your Joint business partner will work together to tap into potential customers.

• What types of people will buy your product or service?• List examples of current clients you sell to (or if you are just starting up –

people you have spoken to who have expressed interest in buying from you)

• What territory will you cover, or sell to?• How will you inform customers about your service or product? How will

you promote your business?• Who are your competitors?Who are your suppliers?

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7. Operational Plan• How and where are your products or services produced?

Explain your methods of:

• Production techniques and costs

• Quality control

• Customer service

• Inventory control

• Product development

15mk_dutta Sept 2010

8. Marketing Objectives • Describe your product introduction, improvement, or

innovation• Describe your distribution plans.• Describe your pricing objectives.• Describe your advertising and promotion efforts.• Specific about your marketing strategies and goals, as

well as how you and your joint business partner will work together to tap into potential customers.

• Any additional information

16mk_dutta Sept 2010

9. Financing and Revenue• How much money do you have, and what is the actual

amount of money you need to start your joint business (start-up budget)?

• How much money is needed to keep the business open (operating budget)? Prepare a

realistic budget.• Funds needed short-term• How the joint business will use the funds, and what this

will accomplish for growth. • Estimated return on investment

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10. Exit Strategy • How do you plan to get yourself (and your money) out of the

business?• How will investors get their money back?

11. Risks and Assumptions • What will you do if your market develops either more slowly or more

quickly than anticipated? • How will you react to competitor challenges such as under pricing or

new products that make yours obsolete?• How will you react to favorable or unfavorable changes in the

industry?• How will you react if there is a labor shortage or other labor-related

issue?• How will you react if there is an erratic supply of products or raw

materials?• Any additional information

18mk_dutta Sept 2010