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5 tips when planning a joint venture

WRITTEN BYJames Price | JPAbusiness

Male and female business partners having a meeting

Joint ventures can provide a great vehicle for business and personal success – they just need to be well planned from the outset. As we tell clients considering a joint venture: preparation is key!

There are generally two broad types of joint venture:

  1. Business benefits – Joint ventures that focus on joint business activities and leverage each other's scale and expertise (complementary benefits) to drive mutual growth and synergies
  1. Business benefits and ownership – This type of joint venture combines the features above with a shared ownership (equity) position and potential for top-up or further buy-out of equity, usually through the issue of options and an agreed valuation, etc. This arrangement provides the synergy benefits for the party or parties, investment of additional capital and an incremental return on risk capital based on the growth in the business.

The JPAbusiness team has been involved with setting up and facilitating a number of successful joint ventures over the years, and we have also been called on to sort out arrangements where things have gone wrong, or haven’t been set up with adequate planning and foresight.

Based on this experience, we've come up with a list of five issues to be aware of and which should be raised with all parties early in the planning and negotiation stages of a joint venture.

Tips for a successful joint venture arrangement

Tip 1: It’s critical that there are complementary benefits and roles for each of the parties in the joint venture. First step is to consider: what’s in it for me? Next step: what’s in it for the other interested party?

Tip 2: You need to very clearly prescribe, from the outset, all arrangements relating to:

Tip 3: We mentioned this in Tip 2 but it deserves highlighting: make sure there is a clear plan for how one or both parties can exit, should the need arise.  

Tip 4: Issues of control will need to be addressed regarding:

  • management (day-to-day)
  • governance
  • transparency
  • business versus personal needs.

Tip 5: It’s often the little issues that lead to a joint venture arrangement breaking down, therefore cultural fit and shared values between the parties are critical. They don’t have to be the same, but there has to be mutual respect from the outset.

Need some help? 

If you need help planning or negotiating a joint venture, JPAbusiness provides a number of related services, including:

  • Independent business valuation
  • Negotiation facilitation between joint venture parties
  • Commercial joint venture agreement drafting and advice
  • Shareholder agreement drafting and advice.

We've also created free online resources which may help:

To learn more about how we can help, contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.

About James Price | JPAbusiness James Price has over 30 years’ experience in providing strategic, commercial and financial advice to Australian and international business clients. James’ blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.