by Thu Nguyen

Created on: August 19, 2010   Last Updated: August 21, 2010

Spinoff companies can be found when the parent company invests in a business idea that has been made in-house. This is not a new concept as businesses have been doing this for years. We just don't see it in the public mainstream, however stockholders of these companies do receive shares in these ventures. It’s one way of not losing out.

This procedure normally works by leveraging the capital that is already present to distribute it to one which is potential of taking off. Thus, there may be risks if research is not done rigorously. Therefore what will contribute to the success of launching a spinoff has to be considered through the time, equity and purpose of the spinoff.

This article will familiarize you with the process of spinoffs and give you tips as well for launching a successful one whether it's a small or large corporation.

~ Recruit Within ~

When a new company is launched, in particular spinoffs, turning in-house to your network of employees for answers and giving them the opportunity to be apart of the new company will work wonders. As they already know how your company runs, shifting to another with the same model but different product, might be something worth the challenge.

Maya Design from Pittsburg is a good example of this. They are a successful technology design and research consultancy which makes the art of spinoffs one that other companies look up to. They recruit within and enhance their network through providing an incentive for those who contribute to the new company and already they have spun four businesses with more in the works.

~ Network and Get Feedback ~

It is suggested that you find business partners which will help you with your ventures as there may be reason to license your product to them in the future. You don't want to see this opportunistically as that may hinder the development of your vision, but more as building your clientele which is a process much more crucial to the company's long-term success.

In particular, you want to continue providing support in the development of the spinoff as this helps the new company stand on grounds strong enough to face the larger companies. If you're a small company, time which is invested in research and especially technology will need testers. So get outside feedback to see potential bugs before you launch the final version.

A good example of getting feedback is Clyde Valley Drilling of Scotland, a drilling contractor, who decided to develop their software in-house. What they found was their knowledge of the business provided what they needed in the software so that further led to the development. With that, they took the idea and made a spinoff company and before launching it so, have tested the software through outside testers. This ensures there are no bugs and once finalized gives them full commercial rights to license the product.

~ Support, Support, Support ~

The success of a spinoff depends on the parent company's capacity to provide continuous support. Whether it's through meetings, legal help, accounting and whatnot. No spinoff can take ground on it's own without guidance. Think of it as the child company where the mother company must continuously provide support to until it’s ready to stand on its own.

What is apparent is the leadership skills and management of an already existing company will turn one which needs direction towards a better path. When you consider all of the points above - recruiting within, networking for business ventures and getting feedback, it makes a lot of sense why spinoffs are successful only when they’re supported. Thus, spinoffs are like babies. They need a little tender love and care in order to grow successfully.

The Art of the Spinoff
Spin Control

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