Enter Into Joint Ventures With CautionA joint venture (JV) is the entity created when two businesses join in a partnership for specific, often strategic, reasons. JVs can be a fantastic way for small businesses to increase their customer bases, and for businesses to share their skill sets to offer new or better products and services. However, in order for a JV to be successful, it's essential for both parties to take the agreement very seriously and do all of the homework involved. A JV that is entered into quickly and without much thought can be at best a waste of time and, possibly, money. At worst, it could be disastrous. To avoid unsuccessful JVs, there are several critical factors to keep in mind, such as choice of partner, a common vision, and good organization. Your choice of partner is probably the most important aspect of creating a successful JV. It's very important that you know your partner well and are confident that they are a trustworthy person or organization. It can be all too easy to get sucked in by a smooth talker who promises you a huge list of client contacts or millions of dollars practically overnight. Don't let your heart's desire run away with your mind's better judgment. Remember, if it sounds too good to be true, it probably is! Take the time to research your potential partner. Look into their past business practices, ask for references and proof of past successes. Make sure they can deliver what they're offering. While it's important that you know your business partner well, it may also be a bad thing to know them too well. Joint ventures with family members or close friends may not be wise. For one thing, if things go bad, you run the risk of losing your business and your personal relationship. In addition, because you know the person so well, you may be tempted to skip important steps, like creating a business plan and drawing up a formal agreement. As a result, in the end, you may find that you didn't have the same goals or understanding at all. You'll want to look for a good balance in a partner -- someone you know well enough to trust, but not so well that your personal relationship will get in the way. Your partner should possess a skill set that will compliment your own. For example, perhaps you're really great at marketing products, but you lack organizational skills. Look for a partner whose organizational skills can make up for your shortcomings and who, perhaps, needs assistance with marketing. Determining that both you and your JV partner share a common vision is another important aspect. To reach a particular goal together, you must both know what the goal is and understand how you're going to get there. If your partner believes the goal of the JV is to grow the business to a very large one, and you believe the goal is to keep the business small so you can run it on the side, you're not very likely to work well together. You can't possibly reach both your and your partner's goals because they conflict! Good organization can help ensure that your and your partner's visions match. To begin, create a business plan that clearly defines what you want to achieve and when you expect to achieve it. The plan also explains who will bring which assets and skills to the table. In addition to a business plan, a formal agreement is necessary. The agreement serves as a contract between you and your partner. It spells out exactly what each partner's responsibility in the JV is. Establishing a successful JV also requires that you organize your time. Don't spread yourself too thin. Understand that a new business takes a lot of time and energy. Don't expect to be able to focus on two projects at the same time. Choose a time in your life when you have enough time, support, and resources to really focus on the JV. With the right partner, shared goals, and clear organization, a joint venture can be one of the best means of increasing your company's size, skills, and customer base. Just make sure you spend time learning everything you can about how the joint venture will work for you, who your partner is, and how you can reach your goals together. |
