Five Things You Have To Consider When Opting For A Joint Venture
Joint ventures are great ideas for business but it is not without its disadvantages. Some fail while others crumble against the weight of the discord. So before you opt to go into a joint venture, here are some things that you have to consider in order to make sure that you will have a successful one.
1. Your partner
Your partner must be somebody or a company who you trust and believe in. If you are thinking of partnering with a company, research also on the owner as well as the man who is running the business. You will need to deal with these guys if you ever push through with the joint venture. The potential partner should also be able to go with the vision that you have for your company.
2. Their contribution
Another important aspect that you need to look into when starting a joint venture is the contribution that each partner will have for the project. The contributions should be made clear at the start of the project and should be written on paper if need be and signed by each of the partners. That way, everybody is made aware of their roles, thus minimizing the potential to slack off from their duties. It is also good to include in the document that if you ever slack off, any of the partners can be kicked out of the partnership or their shares can be lessened.
3. Exit strategy
There should also be something in writing until when the partnership will run. Remember that joint ventures are temporary but they can be in long term. It is good to have a specific date or period of run and then an option to extend for all parties. This will be a good way to ensure that everybody who is staying in the joint venture is still happy and is not just staying because the clause said so.
4. What the companies offer
Before you go around making an offer for a joint venture, make sure that you have thoroughly researched the company or the person that you want to be partners with. Check what they have to offer and make sure that they are the best in the field or that they can offer the product, technology or service that you need. Remember that you are only seeking the partnership because of that missing element and it is vital that you make sure that the missing element is really there.
When two companies go into a joint venture, they will be combining some of their assets. Make sure that the properties that each of you will be bringing to the table is equitable. It is not only in the number of properties but also the value attached to each one. If the contributions are not the equal among the partners, make sure that you talk about it and put them into writing. The sharing of profits may depend on the contributions of properties. The bigger the contribution, the larger the percentage of your profits.
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