A joint venture (JV) is a type of business partnership where two or more parties pool their resources to achieve a specific objective.
In most JVs, this is done through starting a new business project that’s usually temporary in nature.
There’s a good chance a joint venture can help you achieve business goals that seem just out of reach at present.
Access to Another Business’s Audience or Resources
There are many reasons why businesses form this type of partnership.
Chief among them is that it gives you access to the resources of another business.
This could mean their skills or expertise in areas you lack, or it could be access to finances or sharing expenses to lower costs.
It could also be access to their audience.
By working together, you get exposed to their customers and vice versa.
Joint Ventures Are Highly Flexible
Once you’ve found a joint venture partner and confirmed the basics of the project, the next step is to hammer out a detailed agreement.
JVs are usually short-term partnerships with a fixed end date.
Within that time, you can negotiate with your partner on the terms, choosing the ideal conditions that are most suitable to both parties and their goals.
Sharing Rewards But Also Risks
Joint ventures allow you to pool resources and share the rewards of your efforts, but it also lets you spread around the risk.
With two companies contributing capital and labor, there is less loss for you if the project fails.
A JV offers an excellent opportunity to try something new such as exploring a new market.
Build Relationships with New Contacts
One benefit to forming partnerships is that you can use them to deepen relationships you’ve just started with new contacts.
As you add people to your business network, you can reach out to them for projects and build relationships through a joint venture.
You Have a Way Out
Finally, JV partnerships are usually temporary, so build an exit into the contract.
If things aren’t going the way you expected, you’re not locked in for life.
You can wait until the agreement reaches its end, and then analyse to determine what went wrong.
The Potential Risks of a Joint Venture
Before getting into your joint venture, you should be aware of the potential risks:
- There could be differences in resources, expertise, culture, or expectations which can derail the project.
- A business partnership requires you give up control over some part of your business.
- You could potentially get involved with someone you don’t want to work with who is dishonest or has a bad reputation.
Of course, you can mitigate all the above can by choosing your partner well and setting the right terms.
How JV Partnerships Work
The first step is to come up with a project idea.
Review your business goals and decide what would help you get there.
Then, go through your contacts looking for someone who would be a suitable JV partner.
If you don’t find anyone there, extend your search to social media, the internet, or offline events.
Once you find someone, send them a proposal and if they accept, you’re ready to start creating your JV agreement.