What Is A Joint Venture Partner?
A joint venture partner is a person or business who contributes to and works with you or your business to complete or carry out a project or assignment. Joint venture partnerships can be formed as long term or short term relationships, and the terms can vary greatly depending on the arrangement and parties involved. Generally though, both parties in this partnership will be equally invested. This means that costs, risks, rewards, and responsibilities are split as evenly as possible. In agreements where the joint venture partnership is not a 50/50 split, the party with less investment will likely receive less reward as well.
Advantages
In business, there are many unknown factors that contribute to new projects, startups, expansions, or launches. Because of this, it can often be risky, as well as expensive and difficult to step out into new territory. With a joint venture partner, it is possible to share costs and risks between two entities, making the jump into a new business arena more manageable.
In business, there are many unknown factors that contribute to new projects, startups, expansions, or launches. Because of this, it can often be risky, as well as expensive and difficult to step out into new territory. With a joint venture partner, it is possible to share costs and risks between two entities, making the jump into a new business arena more manageable.
Joint venture partners also can help each other by sharing skills, territories, or contacts. For example, if Company A wishes to expand into a new geographic area they may choose to form a joint venture partnership with Company B, who already has a substantial influence, sales force, and marketing plan for that specific area. This allows a strong territorial advantage for Company A, including regional contacts, an existing customer base, and local reputation and familiarity. In exchange, Company B receives additional income from the new sales as well as more resources allocated to their local area and industry.
Disadvantages
While a such a business partnership can help to share the expense, workload, and risk of an undertaking or project, it has the major disadvantage of sharing decision making and management as well. Because there are multiple parties involved, each with their own ideas and strategies, there is a much higher probability that disagreements will arise at some point. Items like workflow priorities, future plans and goals, reinvestment of funds, financial outlays, and other general business decisions can often lead to disputes and conflict between joint venture partners. Be sure to have a partnership contract that clearly states how conflict resolution should happen and who will ultimately be given the decision making authority in the event that there is a disagreement.
While a such a business partnership can help to share the expense, workload, and risk of an undertaking or project, it has the major disadvantage of sharing decision making and management as well. Because there are multiple parties involved, each with their own ideas and strategies, there is a much higher probability that disagreements will arise at some point. Items like workflow priorities, future plans and goals, reinvestment of funds, financial outlays, and other general business decisions can often lead to disputes and conflict between joint venture partners. Be sure to have a partnership contract that clearly states how conflict resolution should happen and who will ultimately be given the decision making authority in the event that there is a disagreement.
Getting Started
Follow these steps to get started with a joint venture partner!
Follow these steps to get started with a joint venture partner!
- Choose a joint venture partner: be sure that the individual or business partner that you select will have the necessary assets, resources, and availability required to hold up their side of an agreement. It is also important that each entity have similar business ideals, as well as mutual interests.
- Create a joint venture agreement: any agreement should be drawn up by an attorney, with all parties contributing to, and in agreement with the terms. It is especially important that the divisions of assets, decision making power, responsibilities, and investments are clearly stated in the written agreement.
- Plan, work, meet: once the agreement has been drafted and signed, the joint venture partnership is complete and it is time to get started. Take time to make a plan and a budget, divide assignments and workload, and allow for questions and answers to be exchanged. Make a timeline for work to be completed and schedule future meetings to discuss progress or completion.
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