Knowing a Good Joint Venture When You See OneIf you have read anything about opening a business or growing the business you already have, it's likely you've seen the term joint venture, or JV. A joint venture is a way for you to partner with another business for a specific reason or reasons. You might find you can bolster each others' strong points or share each others' markets. When two businesses create a joint venture, they are actually creating an entirely new business entity. 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. It's common for very large businesses to enter into joint ventures. In fact, they often need them in order to enter new markets or attract fresh blood. Some countries have laws in place that demand that any foreign business must create a joint venture with a home-grown company before doing business in that country. This can work to the foreign company's advantage if they don't plan to move operations overseas. Having people on the ground where you're doing business is the easiest way to watch the local economy. Even when a JV isn't a requirement, they can give a company a great advantage -- as long as they are carefully considered. Small companies often enter into joint ventures in order to take advantage of skills, management styles and even the customer bases of larger, better established companies. 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. 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. Creativity is one of the most important of these characteristics. You must be able to think outside the box to see many different ways your business could benefit from a joint venture -- and all the different joint ventures your business could fit into. There are possibilities for just about anyone who's interested -- provided that you know where and how to look for them. It's also important to be creative when explaining your plan to a potential partner -- you don't want them falling asleep on you. Persistence is particularly important when you first approach your potential partners. Small businesses have a lot going on, and the owners can forget you if you're not careful. You might also have to explain what a joint venture is if they don't already know. You must have good visualization skills because you have to be able to predict how your side of the JV will benefit your partner, and how the two sides will fit together. Think of it as a jigsaw puzzle. If you're forcing the pieces together, you need to find a better fit. No breaking out the saw, now. 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. Once you have successfully entered into a joint venture, you will need to find and build a client list. If your partner is providing clients for you, you must be extra attentive to their needs and make sure you don't lose them for your partner. If you have clients, they might be wary of your new business and fear that your products or services are about to change or become more expensive. It's important to keep in close touch with them and explain the changes in detail. 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. |
