Proceed With Caution: Joint Ventures

A joint venture (JV) is the entity created when two businesses join in a partnership for specific, often strategic, reasons. JVs can be a fantastic way for small businesses to increase their customer bases, and for businesses to share their skill sets to offer new or better products and services. However, in order for a JV to be successful, it's essential for both parties to take the agreement very seriously and do all of the homework involved.

A joint venture entered into without research or caution is setting itself up for failure. If both parties don't take the process seriously they could lose valuable time and money, or worse destroy their business. To avoid these pitfalls, there are several things one can consider: choose your partner carefully, make sure you share a common goal and above all, stay organized.

Choosing who you want to partner with is the most important part of setting out on a path toward a successful joint venture. Your partner must be someone you trust -- or ideally a person or organization you know very well. There are plenty of slimy smooth-talkers out there who would be more than willing to take your money and run. If they're promising you fame and fortune overnight, it's probably too good to be true.

It's best to find out as much as you can about any partner candidates you're considering. Look up information about them online and ask them for references and a detailed resume.

While it's important that you know your business partner well, it may also be a bad thing to know them too well. Joint ventures with family members or close friends may not be wise. For one thing, if things go bad, you run the risk of losing your business and your personal relationship. In addition, because you know the person so well, you may be tempted to skip important steps, like creating a business plan and drawing up a formal agreement. As a result, in the end, you may find that you didn't have the same goals or understanding at all.

Just like in a marriage, it's good to look for a partner that balances your prominent traits. Maybe you're good at keeping financial records, but you have trouble thinking of creative marketing campaigns. Look for a partner who can add some pizzazz to your joint venture. In turn, she might not be the best bookkeeper, so your skill set will compliment hers as well.

Making sure that both partners share a similar vision is also very important. In order to reach a common goal, both parties must define it and see the path to reaching that goal. If you and your partner have disparate ideas about your goals, it's not likely your venture will last very long. You can't reach two different goals if they are in direct conflict with each other.

Keeping yourself organized can help guarantee that everyone is on the same page. The first step is to write a business plan that specifically outlines your goals and when you plan to achieve them. The business plan will also define the specific products, skills or services each partner brings into the JV.

In addition to a business plan, a formal agreement is necessary. The agreement serves as a contract between you and your partner. It spells out exactly what each partner's responsibility in the JV is.

In order to establish a successful joint venture, it's necessary to exercise self-control and time-management. Don't try to do too much all at once. Starting a new venture takes time and effort. At first, you most likely will not be able to focus on two projects at once. Before starting a new business venture, make sure you have the time and space in your life to properly focus on your new efforts.

With the right partner, shared goals, and clear organization, a joint venture can be one of the best means of increasing your company's size, skills, and customer base. Just make sure you spend time learning everything you can about how the joint venture will work for you, who your partner is, and how you can reach your goals together.