The Spoils And Pitfalls Of Joint Ventures

By Author: Justin Bryce
Total Articles: 35
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If you've done any kind of research about starting a business or helping your new business to grow, you've probably run across the term "joint venture" or "JV." A joint venture is a means of partnering with someone else for specific business reasons, such as to build upon each other's strengths or to enter into a new market. When two entities enter into a joint venture agreement, they create a whole new entity.

The term joint venture does not in fact refer to this new entity but to the reason for the partnership. Also, there are no legal limits on who can enter into a JV -- anyone can, including individuals, corporations, websites and small local businesses.

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.

Joint ventures can create amazing possibilities for two entities -- as long as they are taken seriously. Many small businesses and new entrepreneurs find entering into a JV an attractive option in order to build their customer base or offer new products or services.

Let's take an example: You run a computer sales store but don't offer computer repair services. Your customers continue to ask about these services, and you repeatedly turn them away, recommending the guy who owns the little repair shop down the street. You realize that you could both benefit by creating a business partnership, and he agrees to your joint venture idea. You both benefit. You no longer turn customers away, and he gets all the business plus a cut of the profits.

Although joint ventures offer a great many benefits to all parties involved, they can be disastrous if they're taken too lightly. Small businesses that are able to successfully enter into joint ventures generally possess five common characteristics: 1) Creativity; 2) Persistence; 3) Visualization skills; 4) Negotiation skills; 5) Client relationship skills.

Creativity is a key skill in successfully seeking out and developing joint ventures. You must be able to see all the ways that your business could fit into various joint ventures. There are joint venture possibilities for virtually anyone and any kind of business if you know where -- and how -- to look. Creativity is also important when you're explaining the benefits of a joint venture to a potential business partner.

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.

Finally, once your joint venture is under way, you're going to have to spend some time nurturing your client relationships. This is especially true if you're the partner bringing in the clients. Your existing clients may not understand the joint venture and may fear that their level of service will change. To ensure your client relationships stay strong, you'll need to stay in contact with your customers and work at understanding their needs. This way, you'll not only retain your customers, but you'll also know which offers, products and services they'll respond to.

Joint ventures offer great opportunities for those who enter into them thoughtfully, carefully and properly. If you do your research and make sure to uphold your end of the bargain, it's likely you and your partner will find great success.