Thinking About Forming Joint Venture Partnership? Read this Simple Guide First
A JV is established by two business owners working together on a project. Joint ventures, merge your skills and business competencies with some other business person’s skills and competencies, making way for a more profitable (combined) venture. It could be a project that lasts anything from a few short months to many years.
Joint ventures eventually become important components in many businesses. Many people tout them as the perfect way to expand your business without much effort, and others shy away from them because of the horror stories they have heard. Whatever camp you’re in, this short guide may help you understand better what a joint venture is, and what it isn’t.
Usually the business owners aren’t direct competitors, but rather offer complementary services or products to the same target audience. It’s a great way to expand a business’s reach. The reason it works is because the JV partnership together is better than the sum of its parts. Both parties will be able to offer more to their audience than before. And it often allows you to reach a new audience.
Many women shy away from forming partnerships. But often times it is because of emotional reasons stemming for fear or feelings about competition, rather than from factual reasons.
There are many benefits to forming a JV partnership. A few benefits are:
- Expanding your reach
- Raising awareness of your brand
- Growing your business
- Penetrating a fresh market
- Garnering new skills
- Sharing resources
Establishing a joint venture should be taken very seriously.
The following tips can help you develop a joint venture relationship that works:
Be Very Deliberate With Who You Work With
Consider business owners that you already know, like, and trust, and brainstorm projects you can work on with them. Take some time evaluating the party before you propose a joint venture partnership. Do you know what skills they can offer? What resources they have? What their core values are? Have you worked with them in the past? Have they had other JV partnerships? How did they go?
Use Joint Venture Proposals
Once you are sure you want to work with the person, write up a proposal and submit it to the business owner. If you’ve done a good job explaining how your JV partnership will be mutually beneficial, it’s likely they will want to move forward with your idea. Once you’ve decided to move forward it’s time to hash out a formal agreement.
Use a Formal Agreement
Consider all of the following in your agreement:
- What are the goals of the JV?
- What resources will each side of the JV commit to the effort?
- How long will the JV last?
- Who, if anyone, is in control?
- What will each party be responsible for?
- How will each partner be accountable?
- What results do you expect from the JV?
- How will you measure the results of the JV?
Develop an Exit Strategy
In addition to all of the above, it’s also important to define an exit strategy. If the partnership is not working out for either party, there needs to be a way to escape the contract that is fair to both parties. One way to do this is to make the first agreement short term, then leave it open to increase the time if things are working out. Linking your exit strategy to shared goals and agreed-upon metrics is a good way to create an exit strategy.
There are many reasons why a Joint Venture relationship may not go the way the parties planned. One of the primary reasons for failure is not getting every aspect of the partnership in writing, and not hashing out in writing the benefits that each party is expecting from the JV. Another common reason for failure is that the parties were not aligned in terms of their core values. The culture of a company can tie into many aspects of a business and if the two companies aren’t compatible, problems can ensue. And a huge reason for failure is one party having more skin in the game, with little motivation for the partnership to work on behalf of another party.
Protect Your Intellectual Property
Be sure to protect all of your intellectual property from the JV partnership. You’re going to take some of it with you into the JV, but you want to still own it when you come out of the JV. Seeking legal advice to form the documents can go a long way to ensuring that the JV is healthy and successful.