A joint venture is when two business entities join together to work on a specific project.
It brings together the expertise, resources, and skills of two or more parties and then shares the risks and rewards of the project.
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You can achieve more with a JV than you ever could alone, but there are a few common mistakes that can get in the way of your success.
Failing to Fully Vet Your Partner
You need to be able to fully trust your JV partner.
They need to possess the skills and resources you need, and they need to have a good reputation in the market.
One huge mistake many people make is failing to thoroughly research and gain objective information about their potential partner.
Expecting Things to Work Without a Solid Plan
Although it’s a collaborative project, you have to do a great deal of planning and you can’t expect your partner to do it all.
Create a detailed timeline and use a shared calendar so you can stay on track.
Try to think of all the moving parts.
If you plan well and your partner also plans well, you can easily avoid this mistake.
Forgetting About Finances
Even an online JV project that requires little in the way of capital will require some funding and financial planning.
Make sure you outline where the money is coming from, who is paying what, and how the profits will be allocated.
Create a detailed budget and a plan in case the funding runs out and you need more.
A common problem JVs face is running short of capital.
Basing Your Joint Venture on a Handshake
No matter how informal you like to be or how well you know your JV partner, you always need a contract.
- The contract isn’t only about trust.
- It clarifies the details of the partnership.
- You need to have everything in writing.
Your contract lays out the terms, clears up any potential misunderstandings, stipulates when the JV ends and provides insurance just in case you have disagreements.
Throughout the course of the JV not just at the beginning, there should be regular contact between the two parties.
The purpose is to update each other, offer a chance to voice questions or concerns, and make sure you’re still on track toward your common goals.
Without communication, things can start to go off the rails and you may not even realize it.
Giving Too Much Away
At the beginning of each JV, you need to decide how much control over your business you are giving up.
Be careful with things like your brand or your client list.
If the partnership goes sour, these are things you don’t want in the other person’s hands.
A JV is exciting, but don’t get carried away.
Set realistic expectations about what you will achieve together and create contingency plans in case things donít work out.
Clarify all of this in writing so everybody is on the same page.
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