If you are a small business owner or thinking of becoming one, you have probably heard the term "joint venture" or JV. All this means is a partnership between businesses that have specific interests in mind, such as combining their strengths or sharing their customers. When two parties enter into a joint venture, they are actually creating a new business entity entirely.
The term "joint venture" actually refers to the reason behind the partnership, and not the partnership or new entity at all. There is no legal requirement for entering a joint venture -- anyone can do it. Individuals, limited licensing companies (LLCs), corporations, farmers' markets, co-ops and any organization can form a JV. Similarly, the new company created by the joint venture can be an organization, corporation or other legal entity.
The most common type of joint venture is between two large companies. They enter into them most often to break into a new or specific market. There are countries that demand any foreign interest entering their economy first enter into a JV with a native company. Still, even if it's not a prerequisite, foreign companies can greatly benefit from having an interested party located in-country. The local office can keep a better eye on the social, economic and political situations there.
Even where it's not required, joint ventures offer fantastic benefits when they're not taken too lightly. One reason many small businesses enter into joint ventures is to take advantage of the products, skill sets or customer base of another company.
For example, let's say you have incredible computer repair skills. Your only problem is that you don't have much of a customer base and very little money to advertise. To help your business grow, you approach a local computer sales store that doesn't currently offer repair services to its clients. You propose a joint venture where the store refers its clients to you, and only you, for repairs. The benefits? You get a steady flow of business at no cost to you, and the store adds valuable repair services to its list of offerings to clients.
Joint ventures can be a wonderful tool for business, but they can be a disaster as well if they aren't properly planned out. Successful JVs usually comprise two companies with a combination of five characteristics: 1) Persistence; 2) Creativity; 3) Negotiation Skills; 4) Client Relationship Skills and 5) Visualization Skills.
To seek out and create successful joint ventures, you must let your creative juices flow. Look at all, not just some, of the businesses that could benefit from your help in your area. Joint venture possibilities are everywhere if you look, and pretty much anyone can benefit in one way or another from partnering with someone new. Explaining your idea to a potential partner also requires creativity to keep it interesting.
Persistence will come in especially handy as you begin to explain your ideas to those you'd like to partner with. This is especially true if you're approaching other small businesses who may not understand how joint ventures work.
You must be able to look beyond the present and visualize how your side of the partnership will fit with the other business's contribution. If you look ahead and see problems, you must iron them out before you make any firm commitments. Look for the bigger picture, or the bigger picture might not be as pretty as you'd hoped.
You need to expect a lot of negotiation with your partner while you're laying out your business plan and detailed agreement documents. You want to protect your interests, and of course your partner wants exactly the same thing. Sometimes you will disagree, and you must be willing to show determination and not give in to undesirable conditions. You must be prepared for some serious discussion.
When all that is said and done, you'll need to start thinking about your client relationships. Clients are often put off by the thought of a joint venture, thinking that your business, products or services are going to change or become pricier. To make sure that you continue to gain, not lose, clients, you'll need to nurture them and make sure they understand what the new entity means for them. If you attend to your clients, not only will they remain loyal to you, you will also find out which parts of your new endeavor they respond to best.
Joint ventures can be exceptional business opportunities when they're entered into properly. Just be sure you do your homework and understand exactly what your responsibilities in the venture will be and be clear about what you expect from your partner.
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