CHAPTER 10
Developing a Business Plan for the JV on the basic terms and conditions of the JV, the partners will certainly consider the overall purposes and objectives of the relationship. However, before they proceed with formation of the JV, the parties should spend time preparing an initial business plan for the JV. The business plan should set forth in reasonable detail the field of activity, line of products and services, and territorial scope for the JV. In addition, the plan should cover the goals and objectives of the JV with respect to research and development, production, distribution, licensing, and such other matters as the parties may determine are relevant. Remember that, although a JV is a combination of the assets and strengths of the parties, it is also a separate business that must be planned and managed just like any other independent enterprise.
AS PART OF THEIR NEGOTIATIONS
Creating a Meaningful Plan The development of a business plan is essential to the successful operation of any business. All of the other formational documents—confidentiality agreements, memorandums of understanding, venturers’ agreement, and so forth—deal with the overall concept of the business and the ownership and operational rights of the JV participants. The business plan starts with the concept of the business and builds the process and procedures by which the concept will be realized. This task should therefore be taken seriously, with the goal of creating a meaningful plan. Keep in mind the following points: ■ FOCUS
ON YOUR COMMITMENT TO THE JV, NOT ON MINOR P R E F E R E N C E S In the context of a JV, the development of a business plan is no
easy task, and the issues cannot be resolved in isolation. The difficulties are multiplied by the inherent conflicts of interest that tend to arise between the participants because of their shared ownership rights in the assets and resources of the JV. Each party is likely to have its own preferences for allocation of business assets and resources. Conflicts related to ownership rights can, of course, simply be avoided if the parties enter into a different arrangement that does not involve equity sharing—such as manufacturing or distribution license agreements. They could then operate their own separate businesses and dictate the manner in which their own assets and resources will be utilized. Nevertheless, the parties selected the JV form because they believed that a collaborative effort was necessary to achieve the desired result. Accordingly, each party should first identify their separate concerns and preferences, review each other’s list, and consider which items can be incorporated into the plan without further discussion. Once they have refined the issues, the parties can discuss the remaining concerns and come to a resolution. In their discussions, both parties
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