Coming up with a joint venture model is more than just allocating percentages and resources. There’s a lot to consider, and failing to plan will only stunt your business. Before deciding definitively on a partner, the problems with joint ventures need to be fully smoothed out. Setting the expectations can be the key to assessing the value of the relationship before signing a contract and resolving disputes afterwards.
Managing Joint Ventures
In any joint venture, the scope needs to be defined with exceptions spelled out in detail, and if both partners do not agree to it, it cannot move forward. Your partner should be onboard with the major goals and plans, and their involvement should be clear to each of you. Your partner should know how much they’re expected to contribute, both in terms of capital, time and knowledge expertise. Know the protections that both of you will have under the law, depending on whether or not you’re defining the venture as a new entity or a contract as individuals. If your partner has veto power in terms of management decisions, ensure that they understand how that power is meant to be used before signing anything. Define what will happen if you decide you no longer wish to work with your partner anymore. You need to set out the budget, and make provisions about what will happen if the company goes under or if one of the people in the joint venture passes away.
Doing Your Due Diligence
Due diligence should go past background checks and financial statements. Before you decide, you need to know about the culture, assets and compliance record of your partner. Any conflicts of interest or reputation blotches also need to be addressed before making a decision about a partner. You may need to get a lawyer or investigator involved before signing to fully understand the extent of their history. If there’s any information you’re missing before deciding, you could regret your decision. Much of the work will come from thinking through a variety of different situations, and talking it over with your partner. However, you may need to do some digging independently of your discussions as well.
Suitable Agreements in a Joint Venture Model
You need to give your partner as much consideration in the agreement as possible without sacrificing your own vision. If your partner in a joint venture arrangement gives you a lot of hassle about every point, you may want to rethink moving forward. Similarly though, if they agree to everything without input, this can be a sign they’re not truly invested in the company’s goals and policies either. When Chery Automobiles merged with Jaguar Land Rover, they did so because Jaguar needed a company who better understood the Chinese market. Without asking the right questions about each other or having discussions about expectations, neither entity would be able to achieve their goals.
