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Jan 31, 2020

I get this question a lot since we deal with a lot of Joint Venture and some of my students ask "Edna, what happens when a money partner changes their mind?

First of all, try to find out why do they want to back out from the deal? We all know about that "Shiny Object Syndrome".

May be they are drawn to new ideas or tools and goals and abandon the important tasks in the process. So you will need to Re-Sell them the deal and make them aware about how this deal can be beneficial for them in a long run.

The other key factors that you need to consider are:

  • Get your relationship off to a good start.
  • Communication is a key part of building the relationship. It's usually a good idea to arrange regular, face-to-face or online meetings for all the key people involved in the joint venture.
  • Sharing information openly, particularly on financial matters, also helps avoid partners becoming suspicious of each other. The more trust there is, the better the chances that your relationship will work.
  • It's essential that everyone knows what you are trying to achieve and works towards the same goals. Establishing clear performance indicators lets you measure performance and can give you early warning of potential problems.
  • At the same time, you should aim for a flexible relationship. Regularly review how you could improve the way things work and whether you should change your objectives.
  • Even in the best relationship, you'll almost certainly have problems from time to time. Approach any disagreement positively, looking for "win-win" solutions rather than trying to score points off each other. Your original joint venture agreement should set out agreed dispute resolution procedures in case you are unable to resolve your differences yourselves.
  • Your business, your partner's business and your markets all change over time. A joint venture may be able to adapt to the new circumstances. For example, we had one of the investors backed out on us due to a one of the couple faced a life threatening illness while we were about to close the deal. So we couldn't issue them a refund on the spot but we were able to find another JV partner and were able to refund them in approximately 3 months.

Ending a joint venture is always easiest if you have addressed the key issues in advance. A contractual joint venture, such as a distribution agreement, can include termination conditions. The original agreement should also set out what will happen when the joint venture comes to an end.

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