A quick google search tells us a joint venture is defined as “a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.” Some small business owners we have met don’t like the idea of collaboration, coopertition (which I will cover in a post very soon) or forming a joint venture. I can only imagine this is due to control? or fear? risk aversion? or arrogance? or at a more fundamental level not wanting to share potential revenue? Others however identify opportunities and can see the benefits of leverage resulting in growing the pie for both parties via forming a joint venture.
The opportunities a Joint Venture (JV) creates are open-ended, bring two companies together exploiting their complementary skills, products, services, channels or geographical markets. JV’s are usually formed by two organisations operating in different fields or different markets they can however create opportunities for two small businesses to collaborate on a product or service and go to market as one larger entity or servicing a specific vertical or geographical region etc etc.
The functional steps of entering into a joint venture are not that different to those of entering into an ownership partnership, this Forbes article describes these steps quite nicely. Commercially the construct does involve particular attention to competition (or non-compete), Intellectual Property (IP), trademarks and their associated protections. Equally insurance, liabilities and governance will differ slightly to a standard commercial agreement as the levels carried by each of the companies involved may differ upfront.
Earlier this week I described the keys to a successful ownership partnerships “Successful Business Partnerships – are you all on the same page?” which also apply when forming a joint venture and from our experience have a huge bearing on the success of that venture – moral and ethical basis, trust, philosophy towards money and exit strategy.
Beyond these basic principles and functional steps the two organisations need to resolve roles and responsibilities, who is doing what, money and how you both get paid. Then moving forward as a combined collaborative force this new JV will be phenomenal. Love to share, Vic.