4 Goals, Rules for JV Teams

construction business

We’re not talking junior varsity. We’re talking about joint ventures for construction business profits.

Together, everyone achieves more. Construction business owners are competitive, but the smart ones know when to team with another contractor. Some contractors have long-time ins with materials and service providers. Some have special expertise or have the number of employees needed to meet minority quotas. Partnering can make a project run more smoothly and cost-effectively.

There are no cookie-cutter joint ventures for construction business. But every joint venture agreement should target a specific project, not some vague, as-yet-unidentified opportunity.

1. Determine Who’s Bringing What to The Table

There’s money to be made when your joint venture is well-defined. The right joint venture can lead to above-average bidding accuracy when one partner knows the local market. Each party should understand the possible consequences of a joint venture, especially if one partner is depended on for financial support. If that’s you, don’t jeopardize future relationships with surety and bond providers.

2. Know State Legal Requirements

In Florida, even if all contractors in a joint venture are licensed, the joint venture itself must be independently licensed. Licensing requirements vary by state, so make sure all partners and subcontractors qualify.

3. Size Matters

A small joint venture doesn’t require a large team of attorneys to oversee the contract. There are templates you can follow to save on legal fees; the attorney simply reviews the contract for accuracy.

But don’t cut corners on a big project. Attorney Carl Lothman says, “The larger and more complex the project, the more resources contractors should invest in putting together a comprehensive joint venture agreement.”

4. Agree On the Balance of Power Before You Sign

Don’t enter any joint venture without clearly defining decision-making responsibilities. And power. One attorney said he would always want his client involved in a 50/50 split of power but sometimes it isn’t possible. But even if the division of power is equal, there can be decision-making differences, so a provision for dispute resolution is equally important.

Dividing up the profits and responsibilities for covering losses must be outlined. And considerations for company cultures should be discussed.  The way you run your construction business is your way. Another company’s operations could be completely different but equally effective.

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