Enter Into Joint Ventures With Caution

A joint venture, or JV, is the name for the entity created when two companies or individuals create a mutually beneficial partnership. Joint ventures can be a great means for small businesses to gain market share or increase their skills and services. In order to create a successful JV, however, there are a few things to keep in mind.

If you rush into a joint venture, at best you will be wasting time and money -- or at worst you could destroy the business you've worked hard to create. To avoid these pitfalls, you must choose the right partner, create a shared vision and make sure you stick to an organized business plan.

Your choice of partner is probably the most important aspect of creating a successful JV. It's very important that you know your partner well and are confident that they are a trustworthy person or organization. It can be all too easy to get sucked in by a smooth talker who promises you a huge list of client contacts or millions of dollars practically overnight. Don't let your heart's desire run away with your mind's better judgment. Remember, if it sounds too good to be true, it probably is!

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.

On the other hand, while it is good to know your partner well, it could be disadvantageous to know them too well. Entering into business ventures of any kind with friends or relatives can be a risky proposition. If things take a turn, you could lose both your business and a valued personal friendship. It can also be tempting to skip vital parts of the process when you partner with friends. You might overlook a formal agreement, and later discover you had completely different goals and visions of the JV.

You'll want to look for a good balance in a partner -- someone you know well enough to trust, but not so well that your personal relationship will get in the way. Your partner should possess a skill set that will compliment your own. For example, perhaps you're really great at marketing products, but you lack organizational skills. Look for a partner whose organizational skills can make up for your shortcomings and who, perhaps, needs assistance with marketing.

Defining your goals and vision is also vital to creating a successful JV. To aspire to a goal with another person, you must both understand what that goal is and how you can attain it. If your partner thinks your goal is to make a million dollars your first year, but you think the goal is to donate $500,000 to charity it's unlikely you will work very well together for long. It's impossible to reach two conflicting goals simultaneously.

Maintaining proper books and adhering to the business plan can make or break your JV. To start, write out a clear business plan that lines out your expected achievements and benchmarks for getting there. The plan will also define each partner's responsibilities.

As much as you might want to keep your partnership friendly, you must create a formal, binding contract. This document will keep everyone on safe legal footing if their responsibilities are called into question.

Establishing a successful JV also requires that you organize your time. Don't spread yourself too thin. Understand that a new business takes a lot of time and energy. Don't expect to be able to focus on two projects at the same time. Choose a time in your life when you have enough time, support, and resources to really focus on the JV.

With a good partnership, common goals and excellent organization, a joint venture can be just the thing to increase your fledgling company's size, offerings, technologies and skills. Taking the time to do your homework and learn as much as you can about the process can make the joint venture work for you as hard as you are working for it.

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