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What is a Joint Venture?

A joint venture or strategic alliance is a form of partnership where businesses come together to share knowledge, markets, and profits. Joint ventures can take on various forms. Small companies can band together to take on the goliaths of their industry. Big companies can form alliances with quicker and nimbler small businesses. And small companies have the opportunity to forge strategic alliances with big name companies for expanded geographic reach.

According to Commonwealth Alliance Program (CAP), businesses anticipate strategic alliances to account for 25% of all revenue by 2005, a total of 40 trillion dollars.

No small business today can afford to ignore the rewards of joint venturing.

The Golden Rewards of Joint Ventures

Shorten the Learning Curve: Building knowledge to expand into key markets, develop new products, and improve productivity, can be time-consuming and costly. Small businesses gain lead time, share expertise, and lower costs by forming joint ventures.

Enhance Company Credibility: All businesses especially start-ups struggle with building acceptance within their market and customer base. A key alliance with a larger known branded company can dramatically improve your credibility in the eyes of your customers.

Create New Profit Channels: Your business has limited resources and capital for growth. By formulating a joint venture with a solid partner, your company expands its sales force and distribution channel for low cost.

Build Competitor Barriers: A strategic alliance with several key players can erect impenetrable walls, keeping out competitors and maintaining high profit margins. Once these ties are in place, it is difficult for competitors to unravel these relationships.

Don't rush into a joint venture without understanding the key concepts of strategic alliances and partnership ventures. Poorly executed and badly planned joint ventures are doomed from the start. Learn the secrets of joint venturing.

4 Secrets of Successful Joint Ventures

Companies that build successful joint ventures follow the same systematic process. Although the costs of forming alliances is inexpensive, the cost of not planning out the partnership is far greater in lost profits and failed relations.

1. Set Clear Goals: Know from the beginning what you want to accomplish. Is it reduced product costs, expanded sales, or market credibility? Your partners' goals may be different but complementary to yours.

2. Find a Partner: The best partnership is based on a mutual win-win relationship. Take the time to locate a company with an honest interest in joint ventures and a similar corporate culture. If your small business is focused on long-term customer relations and your strategic partner cares about gaining market share quickly, then your two cultures may clash.

3. Plan the Venture: Map out your negotiation tactics and understand the legal aspects of the deal. Keep win-win agreement in mind.

4. Manage the Relationship: Once a winning joint venture is formed the real work takes place. A good alliance is like a marriage. It is built on communication, trust and understanding.

Joint ventures and strategic alliances can be a positive outcome for all parties involved. Take the time to understand the process and your small business will be well positioned into the future.

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