I was once called by a client to help them to build a strategic plan for a new business. Coming out of three mother companies, this joint venture should leverage their most distinct strengths. Fine.

While asking about the capital structure, no objective answer came across. So, it was not difficult to realise that before planning the lanuch of that business, there was the critical need of defining the Cap Table.

It was really easy to convince all three firms. Their CEOs agreed quickly that we were right in addressing, first of all, governance issues. And then we started to work…

We begun by helping them to model the company; four models were designed by me and another Brazillian associate at Stratega. We closed this phase by presenting and helping the clients to choose which of those alternatives best described their vision. As usual, we needed to synthesise two of them and the decision was taken.

Afterwards, based upon that designed business model, we started to identify all value drivers for it. The work has been completed with 10 main drivers of value. We then asled we asked each CEO to rate them according to their relevence to the new JV.

At last, as consultants and advisors, being clearly with no stake and avoidying any conflict of interests, needed to assess each mother company, defining its contribution to the forth, newborn business.

The outcome was very good. We were all satisfied with the process, but not everyone got happy with the result. One of the CEOs got really frustrated when he saw a smaller percentage on the suggested Cap Table than he was expecting to see. However, our work was approved and they sat at the negotiation table to define the next steps.

Do I need to tell you that only two of those firms proceeded to launch the new business? But, don’t guess who stepped forward to close the deal. It was not the guy who got unhappy.

Anyway, moral of the story is that you cannot define the strategy for launching a new business before outlining its governance. Whoever becomes part of it, needs to be clear about the expectations.

In that particular case, the process provided the clearence to uncover each one interests and preocupations. So, at the end, the new company was born by proper parents.

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Do you have clearence about the governance? If not, start by strategizing it before strategizing business growth. Clarity makes room for commitment.