The Best Strategy to Approach a Joint Venture Partnership
If you’ve just formed a new company or are trying to diversify an established business, you’ve probably heard that using joint venture partnerships is a great way to generate leads, increase revenue, and reach a bigger audience. What you may not know is just how to establish a joint venture partnership for your own business.
What is a Joint Venture Partnership?
A joint venture partnership occurs when two companies come together temporarily to carry out a particular project. They share the risks, costs, and rewards of the venture. The partnership is formed with intention of mutual profitability.
• Example 1
You own a small coffee shop in a strip mall. The retail space next door becomes available, but you can’t afford to expand. You might enter a joint venture partnership with a bakery or used bookstore in order to attract more customers and gain extra space for tables.
• Example 2
You have developed some successfully branded apartment communities in the greater Miami area but have few contacts on the Pacific Coast. You join forces with a private investment firm in Los Angeles in order to expand your territory West.
As the second example illustrates, joint venture partnerships accomplish more than one goal for businesses. By partnering with an investment firm, the developer gains more capital to build apartment complexes. But he also profits from the firm’s established reputation in the West Coast. Meanwhile, the investment firm gets in on the ground floor of the developer’s expansion of a successful franchise.
How to Develop a Successful Joint Venture Partnership
You’re likely to enter into a more lucrative joint venture partnership when the companies involved are personally compatible yet complement each other professionally. That is, the other entity should have similar values so that you can work together smoothly, but at the same time, you need a partner who brings new skills or expertise to the game.
In order to assess compatibility, Business 2 Community suggests building a personal relationship with the other company before you consider asking them to partner with you. Approach them at a trade convention or other networking venue – or just pick up the phone and introduce yourself.
The same personal approach applies when asking another business to accompany you in a joint venture. Don’t send out a generic email. Build on the trust you’ve already established with the company and extend a personal invitation.
What if you know you want (or need) to enter a joint venture partnership with another company but don’t have anyone specific in mind yet?
The best way to determine likely candidates is to consider your long-term objective, what you want to gain once the project is over. Do you want to expand your company’s territory? Branch into a new industry? Get more subscribers?
Having a clear and purposeful goal will lead you to the company that complements you best, not just to companies you want to work with. Remember, joint venture partnerships are symbiotic relationships and work because each company gains something from the other.
Remember: The Devil Is in the Details
Once you’ve approached the company and received a positive response, it’s time to work out exactly what both of you want from the joint venture. What percentage of the profits are you willing to give an affiliate network? How much capital is an equity firm willing to invest upfront?
While there are a number of intangible long-term gains from a joint venture partnership, you need to be specific about how risks and rewards will be shared in the venture itself. Maintaining professional boundaries and a good working relationship with your partner will help when it comes time to reap the long-term rewards of the venture.
About Peak Financial Partners, Inc.
Peak Financial Partners, Inc., part of the Peak Corporate Network entities, is a private real estate investment firm that specializes in a multi-strategy investment approach. They handle mortgage and securities acquisitions, offer equity joint ventures, develop residential and commercial properties, provide asset management services, and acquire investment properties. Working primarily in the office, multi-family, residential, and retail sectors throughout the United States, their capital comes from select private and institutional investors.