10. Lack of Joint Venture Experience
When it comes to your first joint venture, it seems like Murphy's Law take precedence. Before jumping into your first Joint Venture, please do yourself a big favor and talk to a trusted advisor or design firm owner that has Joint Venture experience. It's a small investment of time that can save countless hours of aggravation and substantial dollars.
9. Competing Against Your JV Partners on Other Projects
Let's say your JV has an exclusive long-term arrangement to pursue educational projects in the State of Louisiana. Eventually you will wind up competing against each other on non-educational projects or you could wind up competing against each other on educational projects outside of Louisiana. Consider the implications and how you might deal with them before the situation arises.
8. No Joint Control of the Cash
I have seen many joint venture partners get involved in disputes among the partners. When it comes to financial disputes, the JV partner with the checkbook usually wins. You can level the playing field by insisting upon a joint checking account that requires dual signatures. By this I mean that a signature of each joint venture firm is required on every check disbursed.
7. Thinking Your JV Partner is a Good Business Person
Let's face it, many firms that do a terrible job of managing their finances. Your partner might be one of them. Proceed with caution.
6. Failure to recognize there is no such thing as equal partners
Chances are that one party will do a lot more than the other to earn the fee. Chances are it will be you who contributes more than 50% of the effort. Try to recognize that each party brings something different to the table - this is why we needed a JV partner to begin with. Address the level of effort and fee split before you start the project.
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When it comes to financial disputes, the partner with the checkbook usually wins.
5. Your JV partner has a conflict of interest
Let's assume that your partner has long-standing relationship with the client. You were brought into this project because it was too large or they required your expertise and reputation to win a major commission. Once the JV has won the project, you may have served your purpose and your partner is now more interested in their relationship with the client than maintaining JV relations, including you in the project decisions or making a profit. Address your concerns early on.
4. Thinking your JV partner will look out for your interests
Refer to #7. They might not even be looking out for their own interests. You must be proactive in your JV relationship. If you are concerned about your own interests, it is up to you to take care of it.
3. Forgetting that you now have a partner
In our efforts to please our clients and produce a great project, it is easy to forget that we now have a partner. Make sure that you lay down ground rules as to each party's decision-making authority and when consultation is needed with your partner.
2. No Regular Financial Update
Usually one of the partner firms will be put in charge of the JV finances. Make sure that monthly financial statements are provided along with invoice copies and bank statements. No partner should be put in the position of asking for the information, it should be distributed every month automatically.
1. There Is No Way to End the Joint Venture
Yes, a Joint Venture is like a marriage. Your pre-nuptial agreement should spell out the specifics of how to end the joint venture. It's a lot easier to negotiate a fair deal when both parties still like each other.