How to create a joint venture

 

Standard Operation Procedure

 

 

Purpose: A joint venture is a strategic alliance or partnership between two or more parties that allows both parties, usually companies, to increase their ability to build their separate businesses. Joint ventures are commonly used by companies to become active in a new territory and return higher profits by expanding the company’s network. This should not be confused with partnership. 

 A joint venture can be described as a contractual arrangement between two or more entities that aims to undertake a specific task. A partnership involves an agreement between two or more parties wherein they agree to share the profits as well as any loss incurred in a single venture.

 

Frequency: When needed

 

Procedure:

 

1)     Determine your need for a joint venture.

 

2)     Define your business objective.

 

3)     Research potential partner.

 

4)     Determine if the partner represent a good fit.

 

5)     Prepare and sign a non-disclosure agreement.

 

6)     Decide the format of the joint venture.

 

7)     Draft the joint venture agreement.

 

8)     Determine the management of the joint venture.

 

9)     Define the role of the employees in the new entity.

 https://www.entrepreneur.com/article/77730

Definition/Explanation:

 

            I.     Need: It appear when in your regular business operations, you reach a point when you realize that your business doesn’t have the expertise, technology or operations in a specific area. One way to solve this is through a joint venture with another company that has expertise or operations in that missing area.

 

          II.     Business objective: What will be the purpose of this new business? When you have an idea, you must determine the business objectives. They must be clear. Describe the purpose of the joint venture that you foresee and identify its goals. This will need to be a document that you can share with potential partners to generate interest. The need for the joint venture should be compelling and self-evident.

 

         III.     Partner: You must identify some potential partners. They must be able to complementary to your activities. Maybe it’s a competitor or a distributor. Networking in the business community is a useful way to find potential partners. Shop around, meet with other business leaders, and focus on entities that provide the services or already have the expertise that you need.

 

        IV.     Good fit: Examine the operating structures of the two companies to see if they are compatible. Both companies must be able to work together efficiently and frictionless. Both companies must be committed to success, same things for their employees. Also, it’s important that both companies are financially strong to support the joint venture.

 

          V.     Non-disclosure agreement (NDA): This is a form of a contract by which both parties agree not to disclose or take advantage of anything obtained from the other company. Because of the nature of a joint venture, it’s important to sign an NDA, because your business will share sensible information with another entity. You may choose to prepare an NDA, or confidentiality, agreement before you begin the joint venture.

        VI.     Format: Depending the project (type and size), the format on the joint venture could be different. Sometimes it’s a new corporation, a partnership, or a simple contractual agreement. Sometime, the help of an attorney could be beneficial to determine the format that suit well.

 

      VII.     Joint venture agreement: When drafting the contract, be sure to name the parties to the agreement, with a brief description of each party’s operations. Then introduce the name of the new joint venture and include a brief statement of its intended purpose. The purpose is often stated early in the joint venture agreement. Also, define terms that should be clearly defined. Identify the business objectives of the joint venture. The statement of the objective must be clear and defined, so that the parties to the contract can identify when their task has been met. Finally, define the structure of the joint venture.

 

    VIII.     Management: For the success of the joint venture to succeed, both entities need to agree how they will run the new business. You need to decide if you will create a separate board of directors, elect officers, or set up a team of representatives.

 

        IX.     Role: You need to consider which workers will contribute to the joint venture, and in what proportions. The agreement needs to identify which employees will perform specific functions and how the work of the joint venture will get done.

How to get your startup acquired by another business

How to get your startup acquired

 

 

Starting your own business is a terrific idea for a number of reasons, such as the desire to be your own boss, the need to get things done, a strong belief in your goods and services, or even the need to increase your income. What is required for a startup to succeed is as follows:

·      Strong company structure;

·      Solid sales marketing plan;

·      Devoted managerial team;

·      High-quality accounting;

·      Strong legal team;

·      Healthy financial resources or a clear plan to obtain them; and

·      Ensuring that best industry standards are followed.

 

Whatever your motivation for starting your own business, startups still have a poor success rate because they depend on a lot of different things. Many business owners are grateful for their startup to be acquired (i.e., bought over) by a larger company so that they may make a respectable profit when they sell their company. In fact, American businesses buy many startups on the worldwide market, take Nigerian company Stripe for instance, and they do so at a higher price than their European counterparts. Before deciding to allow a large company to acquire your startup, there are several things to think about, just like with any purchasing or selling transaction.

 

Knowing your potential buyers

It's crucial to first comprehend the many types of purchasers and acquirers you can run into:

 

Venture Capitalists

Investors in your firm that wish to take it to the next level could be potential buyers. VCs may offer to simply invest in your business while offering advice on how to succeed, but they may also ask you to move aside, sell your stake, or resign from your position in exchange for a substantial quantity of money. If you decide to accept VC funding as an investment, your investors will probably suggest ways to boost earnings. Few entrepreneurs, on average, thoroughly examine their business for potential trouble areas.

 

A Competitor

There can be many other businesses in the market for your specific good or service, and you might not be the only one. A rival may want to buy your startup so they can take your clients as their own, or they might want to buy it so they can close it down to get rid of the competition.

 

Strategic Buy

A company that your startup supplies to might decide it makes more sense to buy your company than to pay you money to be its vendor for your services or products. As an alternative, a business can be interested in purchasing your organisation so that it can market your goods to clients under its brand.

Intellectual Property

A company may become the target of an acquisition if it owns a copyrighted product or a trade brand that another business wants. Patents, trademarks, and other intellectual property can be very valuable.

 

Now What?

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The simple part is that we have identified the many purchasers who might be interested in buying your business and their possible motivations. The following step is to figure out how to increase your company's visibility and appeal to potential buyers. You will need the following items to do this:

·      Those with the Means to Acquire You: Choosing between building and purchasing is a decision faced by large corporations when looking to expand. Let us imagine, for the sake of argument that Dangote Group wants to add energy bars to their line-up, and that your business happens to make them. Dangote Group could always create an energy bar division from scratch, but if a business already exists that fits their requirements, buying that business might be more cost-efficient than starting one from scratch. If you want to position your startup as an acquisition target, you must first find possible buyers and then prepare your business to sell to them.

·      Proprietary Technology: The odds of customers purchasing your good or service might be greatly increased by technological integration. For instance, a well-designed system or software that effectively gets your product or service into the hands of your customers can quickly make you visible to larger businesses trying to expand.

·      An Attractive Product: If acquisition is your primary objective, you must have an excellent product. An outdated business maxim states that in order to compete in a market, your offering must be superior to those presently available in terms of quality, value, and timeliness. Disruptive is still included in that list today. An invention that "creates a new market and value network and ultimately disrupts an existing market and value network, displacing established market leading enterprises, goods, and alliances" is what is meant by disruption. Uber and Lyft are two prime instances.

·      Joint Value: Finally, put yourself in a position to demonstrate how a potential merger will benefit both you and your acquirer. The trick is to convince the potential acquirer that your business will help them become profitable while also making sure that your efforts and hard work are recognised.