5 Tips To Successful Joint Ventures
When businesses think of team building, business owners usually associate it with building their companys internal workforce right into a lean-mean fighting machine. Team development, however, should be extended to include external relationships such as those with other businesses. Enter joint ventures or JVs for short.
Joint ventures generally are business partnerships established between two or more parties (individuals, business groups, companies, corporations) for that purposes of expanding the company and achieving merits by joining forces and working as a team. The parties involved with joint venture agreements complement one another, leverage each others assets assets, compensate each others weaknesses, and also at times equally share risks.
Less than 5% of businesses actually use joint ventures effectively and many dont even use it at all. In order to get the most out of joint ventures correctly, multiple factors such as choosing who to partner with, approaching potential partners correctly, negotiating a win-win deal for all parties involved, and having a well-coordinated execution have to be taken into consideration.
There are several types of joint ventures. Big companies may get together to become even more powerful and therefore dominate the market, while small companies may team up to build a stronger presence in their market niche in order to fend off bigger, resource-rich companies. JVs can also be used to gain access into foreign markets. Foreign companies often form joint ventures with indigenous companies that are already present on the market, but lack capital or financing to genuinely take advantage of the market potential. Foreign companies may bring money, new technologies and competitive strategies into a joint venture deal, while benefiting from the relationships and also the brand of the domestic company.
These complementary partnerships benefit all the businesses involved if setup correctly with the right partner. Heres a strong but simple example of a JV that many businesses can take benefit of to grow their small business fast. It is a highly efficient method of increasing business profits by teaming track of another partner whose business is non-competitive and offers a highly valuable asset, a very responsive client list that would be interested in your products or services. By tapping into this hidden goldmine, smaller businesses can save thousands of dollars in marketing expense to achieve their target clientele while experienceing this goal of boosting tha harsh truth. The business offering the vehicle in which to reach these clientele, the client list, benefits from offering complementary products and services that it does not sell and makes a cut of the sales generated from marketing to this list.
Here are 5 tips for joint venture success:
- Choose your partners carefully. Some pot venture has greater chance of being successful if partners have an excellent reputation. An essential component to good team building is having the right partners. They ought to be trustworthy and have a high level of integrity.
Joint ventures involve extensive team building effort because it is a relationship between two parties and if the relationship is to last, it must be nurtured and kept going. Both sides must be able to trust one another and deliver on each others promises. To find the right partner, perform solid market research and approach only businesses you would like to do business with long term. If you wish to form a partnership having a certain company, ensure that its business practices are in-line with yours. It might be very difficult for you to form a trusted team with people who lack motivation or professionalism, so you should look for well-trained, open-minded potential partners.
- Understand what to expect from the beginning of any JV relationship. Know from the start what your goals are, what you want to accomplish, and see in case your goals are attuned with the partner. Each company should come up with a marketing plan and clearly specify what is expected from their potential partners.
Plan your strategy ahead of time and make sure you cover all the legal aspects stipulated in your joint venture contract, like resource availability and management, special allocations, mutual gains, deductions and income issues. Keep to the business development plan and establish new priorities and goals as you progress. By efficiently managing resources and by maintaining a good, competitive business policy, you?ll secure the longevity and the success of your business.
- Draft proposals like mini-sales letters. Compose an expert proposal letter explaining the advantages of the joint venture inside a convincing way. Keep it short, clear, concise and coherent while briefly introducing your company and why they ought to do business with you. Remember to tune in to the radio station your prospective JV partner learns, WIIFM or Whats In It For me personally.
If you want to propose some pot venture to anyone you have to give them a really good reason they should do it. Otherwise, they?ll most likely decline your proposal. Big, successful companies receive many joint venture offers so you need to stand out. You should educate them about the advantages and the benefits of choosing you over the others. If the partner happens to be a dream partner, stay persistent as persistence demonstrates sincerity and determination to really make it work for the potential JV partner.
- Avoid shooting excessive with your offers. If you?re a smaller business, don?t target your offer to a large company first as it will most likely be thrown away. Instead of aiming excessive at this point, establish successful joint ventures with small companies in order to get noticed by the bigger, powerful ones. Begin a reputation as a solid business proprietor who knows how to turn joint ventures into gold for their partners. Businesses naturally gravitate towards successful businesses. Make sure to toot your own horn by announcing JVs through press releases and/or articles in trade magazines. As your business expands, the competition will quickly become aware of your presence, and there is a chance that powerful companies might develop proposals of joining forces with your company.
- Be honest and open with all of business transactions always. After you have negotiated the details from the joint venture, the actual work begins. In order to keep things going, a lot of trust, understanding and expertise are needed for ongoing team building on both sides. Maintain a wide open dialogue and always address issues upfront before it becomes a bigger problem that threatens to interrupt up the partnership.
These would be the basic rules for joint ventures which is ultimately up to you to determine whether a deal will be successful. Learn with each partnership deal to improve on the next deal. Deals can only be made if you go after them. With lots of effort, youll develop enough expertise to become a joint venture expert and take your business to the next level.
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