Is Joint Venture a Good Option For Startups?

Good Option For Startups

Can an old friend or beloved spouse become a business partner – reliable, loyal, sharing your values ​​and beliefs? On the one hand, history knows many examples of the huge success achieved by a group of talented enthusiastic friends: Google, Procter & Gamble, Twitter. However, at the same time, the market is replete with cases when a stable and promising company suffered or completely fell apart due to personal friction between partners. It has numerous examples like email marketing firms, App development companies, etc.

Like any plan, the decision to “do business together” has its pros and cons. How to minimize risks, but maximize the benefits of an affiliate management form; what points should be foreseen and discussed before the start of cooperation; what to be prepared for when introducing a friend into the business – we will talk about these and other important points in today’s article.

Portrait of the perfect companion

First of all, partners should mutually complement each other in the professional sphere: let’s say you know how a landscape design project should be developed, and your partner is well-versed in the market and knows how to negotiate with suppliers or regulatory authorities.

When deciding on joint management, try to answer yourself in detail to several important questions.

  1. Does a potential partner share your business enthusiasm? It doesn’t matter whether you are engaged in information technology or selling confectionery – your colleague must be eager to realize himself through the success of the company.
  2. Is the financial position of the candidate for co-owners stable? Solving this issue, it is necessary to abstract from human condescension. It does not matter for what reason the partner has debts, their presence clearly indicates not in his favor. If, taking a loan, he could not calculate his capabilities, then he is not a very good businessman; if debts were formed as a result of any difficult or tragic personal situation – it will draw attention and strength from work.
  3. Stress resistance. How does your henchman cope with critical circumstances? Examine his past activities, perhaps even direct several stressful situations and evaluate whether his method of solving problems is suitable for you and whether you can trust such a partner in a difficult period.
  4. What questions does the future partner ask? The nature of the discussion makes it easy to understand the degree of professionalism and ownership of the subject. Well, if the interlocutor does not show initiative at all, does not require clarification, it means that he is simply not interested in the intricacies of your business or does not understand anything about them.
  5. The most important question – do you really need an equal co-owner? Perhaps there are other tools to solve the tasks, in addition to the separation of shares in the company? For example, a competent and motivated team in some cases can achieve no fewer results.

Where to find a business partner?

Before exploring areas of partner search, it is worth identifying the reason that generally made you consider the partner option of doing business.

The main reasons for choosing joint business ownership:

  • Lack of funding at the start;
  • The need for shared responsibility, psychological support, collegial development of key decisions;
  • expansion or diversification of a business.

In the first case, everything is more or less clear: relatives, friends or colleagues become partners, sharing your idea and able to complement your business qualities.

When it comes to entrepreneurship that has reached a certain stage of development, a businessman can choose to co-own one of his own hired employees or business partners, whose personal qualities are well known to him: consultants, suppliers, even customers.

Relationship with a business partner: elaboration of details

Novice co-owners often make one typical mistake: they don’t write down the details of their cooperation.

Here are just a few points, ignoring which can cause a lot of problems and conflicts in the future:

  • Agreement on financial policies; profit sharing
  • Conditions necessary for the adoption of another co-owner
  • Strategy development in case of a serious crisis
  • Distribution of roles and responsibilities
  • Mutual control, criteria for evaluating each other’s work and tactics in cases of unsatisfactory results
  • An unexpected increase in workload
  • The decision in case one of the partners loses desire or opportunity to work on an equal footing (in full force)

Partnership agreement

It is no secret that for most people, even those with solid business experience and well-known business acumen, it’s easier to negotiate with clients than with a potential ally. Collaboration presupposes a certain share of sympathy and trust, which purely human makes cold discussion of slippery moments uncomfortable.

However, you should never leave sensitive questions to chance. For example, if you did not discuss in advance on what conditions spouses, children, and best friends of co-owners will come to the company, then after some time the ambiguity can lead to a deeply personal conflict. For example, one of you considers the partner’s son to be insufficiently qualified, and the second is mortally offended. Or the spouse of one of the co-owners will not be sufficiently responsible, and it will simply be inconvenient for the owner to ask the relative as an outside worker. There are more than enough reasons for personal friction in business.

Therefore, a detailed contract is simply necessary. You can develop your own document or take as a basis a sample contract between business partners.

Consider a standard template that needs to be supplemented with details that take into account the nuances of your specific situation.

  1. Section “Functional”: distribution of rights, duties, powers.
  2. Finances: how much has been invested by whom, the ratio of shares in rights to profit, participation in covering losses, and unforeseen expenses.
  3. Completion of the project: proportions of the separation of assets after the liquidation of a legal entity, actions in case of self-elimination (death) of one of the participants

Final Words

So, you learned about if you could start a joint venture for a startup and coming fresh in the market and how it turns out for you. So, take the right steps and act accordingly.

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