With the right planning, robust discussion and a significant level of trust on both sides, joint ventures can be extremely effective for businesses of all sizes. Here are some points to consider if this is something you are planning.
A joint venture could be loosely defined as a strategic model wherein two parties combine for a single, specific project, for the intended benefit of both. The parties involved could be companies or sole traders, the types of projects could be anything from building a multi-million-pound housing development to running a cake stall at a local farmers’ market.
So, now that we have established what a joint venture is, the next question is whether or not it is the kind of thing that is appropriate for you and your business. There are certainly both advantages and disadvantages which must be taken into consideration.
Ask the biggest question first?
First, and foremost, there is the issue of trust. Do you trust the person/business that you would be partnering with? How well do you really know them? Are they reliable? Do you have a track record of having worked together? Can you trust that your partner would be working for the benefit of both parties and not just themselves?
Let’s assume that the answer to all of the above questions is yes and that you are planning to go ahead with your joint venture. Your head will probably be buzzing with ideas and creativity and you will be full of enthusiasm for the project. And so you should be, as there will be plenty of advantages to working with a partner. For instance:
- Knowledge sharing: Two heads are better than one – each of you will bring your own knowledge (be that technical, strategic or market)
- Sharing the costs and risks: You will be splitting the cost, thereby halving the risk, so, should the project fail, you will also be halving the loss
- Generating a new income stream: Your joint venture may well be into an area you would not have gone into on your own, opening up the possibility of generating a new revenue stream in a new marketplace for you
- Enhancing your expert status: Building your credibility – both you and your partner will be bringing your own specialised knowledge to the table, so you will now be seen, if only by association, as something of an expert in your partner’s field as well as your own.
- Trial a new product offering: Many joint ventures are for a single, specific project, be it for a day, a month, or a year. It will have a defined end point, so you will easily be able to decide whether or not it has been successful, and is worth repeating, or building on, in the future.
It all sounds good so far. What could possibly go wrong? Well, there are one or two things which you might possibly want to bear in mind…
- Are all things equal? Most joint ventures require an equal level of commitment from each partner but, in the words of George Orwell, ‘Some are more equal than others’. Can you be sure that your partner is as personally invested in the success of the project as you are?
- Mutual Objectives: Shared objectives – have you discussed, at length, what your objectives are? For sure, everybody wants to provide value and make a profit, but are you absolutely certain that you are in full agreement on the best ways to achieve this goal?
- Managing the money: Shared profits – earlier, we discussed the benefits of sharing the costs and the risks, but this also means that you will be sharing the profits. Such is life…
- Reliance: Mutual dependence – once more, this comes back to the trust issue. Each of you will be depending on the other to honour their side of the arrangement. Can you be 100% sure that your partner will do this?
- Conflict of interest: This shouldn’t be an issue. After all, you probably would not have agreed to work together if you were in any way conflicted, but it is still worth considering, even if only as a point of discussion when ironing out your arrangement at the very beginning.
If you have a shared goal, experienced a good prior working relationship, and are planning a venture where each party’s contribution can be equally beneficial to the other and have discussed and planned for all eventualities, then the pros should outweigh the cons and it is probably worth giving it a shot. You will be breaking new ground, and one opportunity often leads on the next, so in the immortal words “nothing ventured, nothing gained…”
I am running a joint venture of my own “Storytelling for Speakers”, on July 18th at the Mercure Hotel in Pembury, Kent with public-speaking coach Aly Harrold. This workshop will be ideal for anyone who needs help crafting and delivering their business story in front of an audience.