Joint ventures have quickly become one of the fastest and most powerful ways to grow a business, but they are not without their share of risk. Some statistics suggest that less than half of all JVs survive less than four years, which is rarely enough time to see the true benefits of a successful partnership.
To ensure your JV partnership is a successful one, we have some tips for minimizing risk in this sort of strategic alliance.
Establish a Common Purpose
The first step in minimizing risk is to ensure both partners are on the same page right from the beginning. This means that both JV partners need to be explicit about why they want to enter the partnership in the first place and what they hope to achieve from their strategic alliance. If you both know the objectives up front, you will be less likely to suffer from unmet expectations later in the process.
A Comprehensive JV Contract
Many JVs dissolve because there is no accountability between partners. This makes it easy for one company to escape with sizable benefits, while the other company merely feels put upon and taken advantage of.
If you are in this situation, get the terms of the agreement down in a contract that both partners sign. This protects the interest of all companies involved and provides recourse if one partner does not have his expectations met sufficiently.
Input from Both Partners
Joint ventures become much less risky if both partners are equally invested in the agreement. This means that each company should bring its own set of talents and resources to the table to ensure the partnership is as successful as it can be. When both partners put something of themselves into the agreement, they will be more likely to stick with the partnership until the end of the venture.
Proper Leadership for the Joint Venture
Many companies fail to establish the proper JV leadership, which leaves the entity to flounder on its own. Create a leadership structure that holds all parties accountable and guides the partnership into a successful enterprise. Once the leadership is set, communicate with employees of both companies so they know who to report to when working directly with the joint venture.
Ongoing Communication between Partners
Once the wheels are in motion, ongoing communication between partners will ensure that the venture continues in an upward direction. Communication minimizes risk by allowing both partners in the agreement to address concerns and obstacles as soon as they arise. Regular attention to the partnership will greatly enhance your odds for success.
Joint ventures can be profitable propositions, but they also entail their share of risk. To minimize potential loss, follow the steps above to properly establish structure and provide regular maintenance so your partnership will be more likely to thrive and grow.
Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.
To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.