There are many important considerations when entering into a joint venture. Some of the first things that should be considered are the character and philosophy of the businesses joining together. Before determining the logistics of the business combinations, it is important to make sure philosophies and motivations for running the business align. Failure to be on the same page regarding these topics can either make or break your venture’s success.
Over the course of the next few months, I will be sharing four major considerations that should be accounted for: character and philosophy, market and product, people and assets, and financial health. Before asking these questions of your future partners, it is important that you are able to answer for your own company, as well. Below are some questions you might ask a potential business partner when determining if they are a good fit, philosophically:
- Why did they go into business?
If you can determine why someone went into business in the beginning, it won’t be hard to figure out what will drive them going forward. Are they in it for the money? The social impact? To disrupt an industry? Make sure this reasoning aligns with your own since it will likely be the driving force behind many decisions.
- What are their top priorities, in regards to product?
Similar to the questions asked above, what matters are taken into consideration when developing a product or service? Quality? Cost? End-user demand?
- How do they treat their employees?
How does the company invest in their human capital? A business cannot perform at its highest capacity if the employees are not satisfied and fulfilled by their work. Can your teams build off each other’s strategy for employee care and retention?
- What is important to the leadership outside of their workplace?
It isn’t uncommon for work life and personal life to intersect. Understanding what their morals and values outside of work are will give telling insight into what is important to them in running their business.
- What are their short and long term vision and goals for the company - and the joint venture, for that matter?
Is the end-goal of the business to create value, to generate large amounts of revenue, to disrupt a market? Make sure your goals agree with those of your future business partner’s.
- What are their spending habits?
Are they reinvesting in their business or spending needlessly? Are they withholding spending completely or being careful with their resources? Each of these points can inform the likelihood of your venture’s longevity.
- Do they meet regulatory standards with their products?
This question is fairly straight-forward: do they meet regulatory standards or do they try to find loopholes? Are they continually seeking best practices or remaining complacent with current methods?
- Do they have interaction with competitors in their market?
How aware are of they of their competition? How do they stack up? It is important to be cognizant of where you and your future partner stand in relation to competitors. Together, will you be able to stand out amongst the market?
As you ask yourself, and your future business partner, these questions, make sure to brainstorm some of your own. You will know better than anyone what values are most important in order to maintain the integrity of your business. Be sure to check back again next month to look into another important factor to consider when entering a joint venture: understanding your product and market.
ABOUT THE AUTHOR – STUART GUTWEIN
Stuart Gutwein is co-founder and attorney at Gutwein Law. His career encompasses over a decade of experience in several areas of business including mergers and acquisitions, business formation, and product development. He currently serves on the Indiana Business Law Survey Commission, serves as a board member of M25 Group and is an active member of the Ag Law Council of the Indiana State Bar Association.
