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The Vital Point of Joint Ventures |
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So you're going to take the plunge and start a joint venture. Excellent! As long as you consider the details and think it through as if it's a whole new business, your new venture could mean exponentially greater profits for you! |
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| Author: Justin Bryce |
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The most important thing about creating a lucrative joint venture is to carefully prepare and think out every part of the partnership. This means you must put every detail -- and that means every detail -- down in writing! There are three written documents that everyone creating a joint venture must have in order to get started, follow the road to success, and eventually break the agreement 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 first document, the agreement, is really a contract. You and your partner will create a legal document that outlines and defines the entity you are forming. It will list the goals of the venture, each side's responsibilities, how long the JV is expected to last or the circumstances that would lead to its demise. It also will cover how revenues and profits will be split, and everyone will want to know that up front.
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 decided to draft the agreement with your partner, look for a good template or checklist to help you. There's so much to cover that some important items could easily be missed. Templates and checklists may be available through your lawyer or local business organizations, or you can search for them on the Internet.
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.
Finally, you need a written exit strategy. Although it might seem a bit pessimistic to consider how the JV will end before it's even begun, the truth of the matter is that the average lifespan of a JV is about seven years. JVs end for any number of reasons. You may plan to end it after a certain length of time, or it may fail due to changes in the market. You need to be prepared for any situation.
A good exit strategy protects your investment in the JV. For example, if you bring a trademarked item into the partnership, you'll want to make sure you walk away from the JV still holding full rights to that item. Or, if the business that results from the JV is to be sold, you'll want to ensure you get your proper 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 prepare for your new partnership by putting all your plans in writing, not only do you prepare for your great success, but you and your partner can be assured that you are truly committed to doing business together. These documents are irreplaceable for following your goals, seeing your JV reach milestones and looking back at where you started from a vantage point of success. Plus, they can keep you out of a lot of legal hot water if anything goes wrong.
About Author
To learn more about Joint Ventures and Joint Venture Contracts visit the writer, Justin Bryce, at his website:
http://www.lazy-internet-marketing.com/bm/joint-ventures.ag.php
Article Source:
http://www.1888articles.com/author-justin-bryce-4846.html
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