The Vital Point: Joint Ventures In Writing

By Author: Justin Bryce
Total Articles: 35
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You've decided to enter into a joint venture (JV). That's great! If you think it through carefully and take the time to treat it like a brand new business, your JV could help your business grow exponentially.

The key to creating a truly successful JV is to take the time to thoroughly plan every aspect of the partnership. And, you need to get everything -- and I do mean everything -- in writing. Those written documents are essential to getting started on the right path to success, staying on the path, and safely stepping off it if necessary.

There are three written documents that are necessary for every joint venture: 1) a joint venture agreement; 2) a business plan; and, 3) an exit strategy.

The joint venture agreement serves as your contract between your business and your partner's. In order to create the separate entity you're forming through the JV, you must have this legal document. Its purpose is to explain the reasons you're entering the joint venture, each parties' varied responsibilities, the length of the agreement, an outline of management, how expenses and profits will be divided and when and ...
... how the JV is to be dissolved (or under what specific circumstances it would be terminated.)

Due to the legal status of a contract, both parties would benefit from hiring council. The partners in the JV might be able to construct the entire agreement together, but it's just good practice to have your lawyer review the contract before you sign it. He or she might see a hole, and this added security will help protect both your interests.

If you do decide to go it alone and create your own original contract, it's a good idea to consult the Web for templates and tips and hints. The vast amount of information you will need to cover, plus all the foresight you must have into any eventuality makes it easy to miss some things.

Then there's the business plan. This document absolutely requires the presence and input of all parties in the agreement. Writing the document can also be fun, because it outlines all your future plans, such as goals, revenue benchmarks and what each party is bringing to the JV. The business plan will also outline how you intend to fund the venture, and how you plan to acquire loans or other outside money if necessary.

Even if you are flush with cash and don't need external funding, it is absolutely vital that you write a business plan. You and your partner will refer back to this document time and again when you are reviewing your progress and planning your future. You can also look to the business plan to watch the progress of your day-to-day operations, such as management, human resources and communication strategies.

Business plans can be fairly complicated and lengthy. If you've never written a business plan before, you may wish to hire a professional writer. Professionally written business plans have a greater chance of receiving funding.

Sadly but truly, you will also need an exit strategy. Don't worry, you aren't condemning yourself to failure by thinking about how it might end. The average joint venture lasts about seven years, and they end for a myriad of reasons. Your JV might have an expiration date when you write your initial contract, or someone's circumstances may change -- you might win the lottery! You just never know.

A proper exit strategy will protect all parties involved in the agreement. If you came into the project with a patented item, you still want to hold all the rights to that item when you leave the team. Likewise, as we all hope will happen, if the JV is wildly successful and you decide to sell, you want to make sure you get your share of the profits.

The exit strategy will line out in definite terms what each partner will leave with. Most exit strategies also include a list of possible events that would lead to the dissolution of the partnership, such as meeting specific goals, a rise or fall in the economy or a sale of the JV. Again, since this document is legally binding, it is advisable to have a lawyer peruse it for errors or things you might have overlooked.

When you go about it the right way and put all these aspects of your JV in writing, it will ensure that you walk out of the agreement with everything you had when you walked in. Creating these documents also reveals a sense of your professionalism and commitment to success. Most important, they will keep you and your business partner from fighting a nasty legal battle if and when the partnership is over.