A Simple JV Partnership Guide

Posted by Webmaster - September 11, 2013 - Blog - No Comments

Joint ventures become important components in most businesses eventually. Many people tout them as the perfect way to expand your business without much effort, and others shy away from them. Whatever camp you’re in, this short guide may help you understand better what a joint venture is, and what it isn’t.

A JV is established by two business owners working on a project together that could last anything from a few short months to many years. 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.

There are many benefits to forming a JV partnership such as:

* Expanding your reach
* Penetrating a fresh market
* Growing your business
* Garnering new skills
* Sharing resources

Establishing a joint venture should be taken very seriously. 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?

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.

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?

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 JV may not go the way the parties planned. One of the 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 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.

Finally, 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.