Many Indian entrepreneurs are quick to propose a joint venture (see specialist article Why Indians always only want one thing). Unfortunately, this also applies to those who may just want your money or technology without having to do much work themselves. True to the motto: You can try it - and maybe the German company will agree to it...

For you as an entrepreneur from Germany and a sought-after joint venture partner, there is a very simple way to do this seriousness and quality such requests without much effort to be able to assess: Simply ask the Indian interested party to create a business plan that contains concrete statements about the goals, the planned distribution of tasks and the necessary investments for the coming years.

Believe us: you will never hear from at least a quarter of Indian prospects again. Another quarter at least point out that we can talk about all the details in due course. The next group disqualifies itself with absolutely unrealistic simulation games or due to the poor quality of a so-called business plan that was actually delivered. Only the remaining quarter is usually worth the time spent for serious consideration.

Joint ventures in India: Yes, but fair, transparent and with an exit scenario

Our previous specialist articles on the topic of joint ventures we critically analyzed the reasons for a joint venture. Please don't misunderstand us! We have absolutely nothing against establishing a joint venture, but it must “make sense”. That means

  • It must offer demonstrable added value compared to the alternative of going it alone.
  • It has to be fair. The services to be provided must therefore be clearly and unambiguously defined and evaluated.

The initial scenario of a joint venture is manageable and easy to describe. However, it becomes critical if you fail to make appropriate agreements for future situations. This affects all key aspects of a company, from investments and the corresponding capital procurement to personnel decisions at management level.

It is also important to make binding agreements if the joint venture is dissolved. This possibility should always be taken into account, because 80% of all German-Indian joint ventures fail within the first 5 years!

This all sounds absolutely trivial. And that's it. But, as practice shows, hardly any company adheres to these basic principles - unfortunately! It's all about applying the same criteria to your investment in a new business as in Germany or anywhere else in the world - why not in India too?

Business plan, reporting & success monitoring

We have seen it more than once that in joint venture negotiations the initial scenario was agreed upon in great detail, but the future commitment was only considered very vaguely - if at all. What is often missing is a meaningful and reliable “business plan” that also addresses such “little things” as future cash flow.

There is also usually a lack of clear agreements on later reporting. From the perspective of the Indian joint venture partner, it will certainly be sufficient to more or less meticulously provide you with the financial data listed in the “Companies Act”. Unfortunately, these don't really help you assess the extent to which business goals have been achieved. It is also not clear from this which steps should be taken in the future and which investments will be necessary and why. That's why it's important right from the start to agree on the later reporting standards and the report content.

The joint venture agreement should be at the end, not at the beginning

We do not believe in structuring a joint venture through so-called “contract negotiations”. In practice, however, we often experience that at the very beginning of the talks, the Indian side presents huge draft contracts in which hundreds of small and minute details are offered for discussion. The most important question, what you actually want to achieve together and what goals the two partners are pursuing, is usually not discussed at all or only in passing. It's easy to get lost in secondary theaters of war!

For us, a joint venture contract should only be drawn up at the very end of the negotiations, as a quintessence of the results, so to speak, and not at the beginning as a “roadmap” for later. And very important! The joint venture contract MUST also include exit scenarios.