Compensation model for a joint venture


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We're looking to enter a joint venture with another entity in order to collaborate on a large IT based project. The agreement is that the other entity will provide most of the human resources, whereas we'll provide specialized human resources with a lot of know how as well as some in-house tools and frameworks. Any suggestions for a compensation model for such a joint venture, as well as how to evaluate the different contributions?

Business Model Compensation Joint Venture

asked Mar 17 '12 at 00:56
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James
6 points
  • what is it you want out of the venture? – Tim J 8 years ago

1 Answer


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It will be important to understand the market rates for what each company will be contributing to the joint venture and use this information as the basis for compensation. For example, Company A is providing the general staff to do the work and Company B is providing specialized staff and work product to the venture. The next step would be to assign a percentage contribution to each company based on the company's share to total project contribution. This should be relatively easy to do since you probably had to put together a scope of work to bid on the IT project in in the first place. The compensation model should have trigger points to make sure that in order for either company to get paid their share they must meet certain milestones (e.g. hours worked, percent completion of project deliverables and so on).

On another note, there are a lot of legal issues with joint venutues. If the deal is not structured probably your company could be liable for debts or issues of the other company that have nothing to do with the IT project for which the companies are collaborating. Make sure to hire a good attorney that knows about joint ventures and understands how to limit each companies liability to the joint venture only.

Hope this helps.

answered Mar 20 '12 at 06:42
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Kimberly Loftis
1 point

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Business Model Compensation Joint Venture