40% to 70% of joint ventures fail in less than a year of their formation. It’s only logical to wonder how you can avoid this fate. The idea is to learn how to start a successful joint venture, beneficial to all involved parties.
Maybe you have a fantastic business idea but you lack the capital to execute it. You may choose to bring other people in to fund it. Also, these individuals will bring in their expertise which boosts the odds of success.
Read more now to uncover the secrets to a successful joint venture.
Have Specific Objectives
Before you get into a joint venture, you must be specific on what you hope to achieve. Don’t be blinded by the mutual objectives and strategies. Explore the different ways that you’ll benefit from the venture.
For instance, you may be looking to expand the business to new locations or increase your earnings. When you start discussing the joint venture idea, learn the objectives of the other parties. See if they have the same aspirations as you or not.
Successful joint ventures are the ones where both personal and overall objectives are fulfilled. It’s wise to write down all the things you wish to accomplish. You’ll use them as a metric for determining the success rate of the joint venture.
Choose the Right Parties
Nothing kills a joint venture more quickly than having the wrong parties. You’ll have conflicting ideas and fail to agree on how to grow the business. The disputes will derail the implementation of key business strategies.
To overcome these deterrents, be cautious when choosing parties for the joint venture. Look for individuals who share your passion and vision. Also, the right parties are the ones who are open-minded and willing to compromise.
Due diligence is a necessity when considering a JV with another business. The idea is to see how this other business operates and what it’ll offer to your business. Look to form a synergetic relationship with the right parties.
Invest in a Strong Management Team
When two businesses join, numerous things are bound to go wrong. These businesses had different operations methods and objectives. It’ll take time for these businesses to realize they’re now one unit.
To simplify the formation of the joint venture, you’ll need to invest in strong leadership. The idea is to have a management that understands the intricacies of joining two businesses. The right management will bring the employees of the two businesses together and make them one team. Also, this team will assure the workers of job security, which is a major concern.
Pick the Best Structure
With a joint venture, you don’t have a limitation on the legal form. It’s up to you to decide the ideal structure to take. For example, you can choose a general or limited partnership or a company limited by shares.
To decide the right structure, you should consider the features of each. Explore the advantages and limitations of these different structures. The objective is to determine one that’ll work best for your joint venture.
The ideal structure simplifies business expansion and implementation of the set strategies. Also, look for a structure that offers simple-to-implement dispute solution methods. The goal is to rely on the joint venture structure to decide the distribution of control and responsibilities.
If you are uncertain about the best structure for your joint venture, consult our law firm. You’ll get joint venture advice from our competent lawyers. The objective is to learn the perfect joint venture structure to pick that favours business growth.
Involve a Competent Attorney to Draft the JV Agreement
Many people make the mistake of forming a joint venture without having a formal agreement. They assume that they’ll always agree on how to undertake various transactions. With time, unexpected things will happen, which you’ll struggle to resolve.
Having a joint venture agreement will help you avoid numerous conflicts. The challenge is knowing the specific things to include in the agreement. You are likely to have no prior experience doing this work, and it’s necessary to involve a lawyer.
Call our law firm today to talk with one of our highly skilled lawyers, they will help you understand the importance of a joint venture agreement. Also, we will discuss with you the specific clauses to include in the agreement.
The target is to get a comprehensive agreement that shows the contributions of each party and states the ways of control and roles of these parties. The idea is to clarify what each party will be doing once you formalise the JV.
Also, our lawyers will help you handle any legal issues that arise when running a joint venture. Investing in professional legal representation smoothens the operations of the newly formed business.
Here are some of the most common legal issues that affect joint ventures.
1) Confidentiality and Privacy Disputes
When two businesses agree on a joint venture, they may fail to discuss how to handle proprietary information. Can employees from any of these businesses access this information? Can one of the businesses use the proprietary information to get an edge? Involve a competent attorney to learn how to draft the confidentiality clause in the JV agreement. The idea is to determine who can access sensitive business information. The clause will highlight if the authorized persons can share confidential business information.
Involve our qualified lawyers to discover how you can enforce the confidentiality clause. Our lawyers can also mediate a privacy breach dispute resolution.
2) Distribution of Control and Sharing of Roles
The common misconception is that power in a JV should be distributed according to the parties’ contributions. However, that ignores non-monetary contributions. For instance, you may bring in technical expertise. The right lawyer will advise you on how to share control and roles in a joint venture. The goal is to discuss how you’ll make decisions.
3) Non-Competition Agreement
Your business and another may agree to undertake a joint venture for a given period. The venture may offer products or services that are similar to your business. You’ll have to know how to handle the competition.
It may feel unfair to reduce your business activities to avoid competing with the joint venture. To handle this problem, you’ll need to add a non-competition clause in the agreement. The obstacle is deciding the specific things to include.
Reach out to one of our business lawyers to learn more about the non-competition clauses. The objective is to avoid a situation where the two businesses are competing with the joint venture.
4) Termination of the Joint Venture
It’s always wise to have an exit strategy when getting into a JV. The goal is to avoid being stuck in a JV which is no longer advantageous to you. You’ll target to know the right way to handle a termination.
The termination clause will discuss things that may lead to a dissolution of the joint venture. Also, you’ll agree on how the joint venture assets will be distributed. The goal is to partway peacefully and in good faith.
Rely on the help of our business lawyers in developing an exit strategy in the joint venture agreement.
Debating on if a Joint Venture Is the Right Business Move to Make?
A JV will allow you to access more resources and exploit new markets. However, you’re uncertain about whether it’s the best strategy for your business. You’ll wonder what the pros and cons of a joint venture are.
We have the best business lawyers who’ll advise you on how joint ventures operate. You’ll discover what to expect and how to avoid disputes. Our commercial lawyers will help you with due diligence when searching for the right parties for a JV.
Reach out to us today, and we’ll advise you on how to draft a comprehensive JV agreement.