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Getting Started With Joint Ventures

If you are a small business owner or thinking of becoming one, you have probably heard the term "joint venture" or JV. All this means is a partnership between businesses that have specific interests in mind, such as combining their strengths or sharing their customers. When two parties enter into a joint venture, they are actually creating a new business entity entirely.

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.

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.

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 say you are a software engineer who knows how to fix many of the bugs that plague computers. You have advertised your services, but you just aren't getting much business. You know that there is a store down the street that sells computers, but doesn't offer repair services, so you approach them about a joint venture. They will benefit by no longer turning people away who need repairs, and you will start making money doing what you love.

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 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 also vital when you begin proposing your ideas to potential partners. Small businesses that you may be interested in working with might not know what you're talking about when you bring up JV.

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.

Negotiation skills are absolutely necessary if your JV has any chance of success. You will have to spend many hours with your new partner making sure you are both going to get what you want out of the deal, and that it's a fair amount of work for both of you. Sometimes, that will mean being assertive. Being too passive might mean you end up doing all the work and only getting half of what you wanted out of the deal.

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.