Take Your Business to the Next Level!

A Joint Venture (JV) is a business arrangement between two or more entities that agree to share the risks and returns for a specific goal. Businesses typically pursue joint ventures for several reasons, including:

• To enter into a foreign market
• To expand your workforce
• To obtain business funding
• To access a new market
• To combine assets and operations
• To share risk for major investments or projects
• To build credibility
• To access skills and capabilities
• To add to a product line
• To expand market share

All of the above purposes are good for both starting a business and growing one. All of these goals can be used as a strategy to get your business to the next level. Here are more details on how you can use this list to grow your business, even if you have a start-up.

1. Form a joint venture to enter into foreign markets.

Many U.S. companies have a goal of expanding their businesses internationally. Some companies lack the connections or financial resources to take advantage of this opportunity. One way to reach this goal is to form a joint venture with a company in the location you’d like to expand. Another option is to joint venture with a company in the U.S. that has the international connections you’re looking for.

Expanding your business to another country or continent should be carefully considered with your corporate attorney.  Different locations have different commerce laws and regulations so be sure to work with an attorney that is knowledgeable about international business law.

2. Joint venture with a temp agency to expand your workforce.

If you need more workers but you lack the funds to hire full-time employees, a joint venture with a temp agency could work for you. Temp agencies are a great way to find temporary workers that can help you complete a business task. It’s also a good way to save on payroll taxes and other expenses that an employee entails.

3. Form a joint venture with a financier to obtain business funding.

For business owners that would like to expand, forming a joint venture with a financier may be a good option. The right financier can provide funds that a company would otherwise not have access to. For example, a restaurant owner wants to expand his business into three franchises and needs $3 million. The owner can form a joint venture with a private investor that agrees to provide $3 million to the restaurateur in exchange of a small percentage of the monthly or yearly profits.

4. Access a new market with a joint venture.

Joint ventures can be advantageous for business owners that want to their company into a new market. For example, an interior designer may want to enter into the home décor product market by designing and selling home furnishings. The designer can joint venture with a home furnishing manufacturer that can produce her products. In another example, an athletic footwear wholesaler that wants to enter into the fitness equipment market can joint venture with a fitness equipment manufacturer or wholesaler.

5. Form a joint venture to combine assets and operations with a company

If your business is lacking assets that you need or if you’d like to improve your operations, joint venturing with a resourceful company may prove helpful. Also, there may be a time when you need to improve your business model or you lack the funds to keep your business going. These issues can be resolved by forming a joint venture with another company and combine your operations. Sharing operations with another company can also help you save money on expenses, such as office space and employees. For example, a marketing company that wants to add to their personnel can joint venture with a graphic designer that has that necessary staff.

An example of sharing assets occurs with new farmers. They often joint venture with established farmers to share the costs of expensive farm equipment. Once the new farmer is established, they typically dissolve the joint venture.

6. Joint venture to share risks and rewards of business projects and investments.

If you have a business project you’d like to complete, utilizing joint ventures can help you complete your project faster and more efficiently. It’s also beneficial because you can share some of the project’s expenses with your joint venture partner. For example, a caterer that lacks commercial space can joint venture with a restaurant to host their catering events. In this example, the caterer shares the food and event expenses with the restaurant and, in exchange, the restaurant owner gets access to potential customers.

In another example, a pharmaceutical company can joint venture with a research company to complete a research project for their medications.

7. Joint venture with a well-known company for instant credibility.

Depending on the industry, it can be difficult for new companies to build credibility. This is especially true for service companies. One of the easiest and quickest ways to become more credible to potential customers is to joint venture with a reputable company. It’s best to work with a company that complements the service(s) your business already offers. For example, a new real estate brokerage can joint venture with a well-established mortgage firm. The Mortgage Company can refer their clients to the realtor in the case that the mortgage client is seeking to buy or sell a property. Since the mortgage company is already well-known, their clients will be more willing to take their recommendation of working with the new realtor than search for someone they don’t trust.

Another example would be a new home inspection firm joint venturing with a reputable construction company. In this case, the home inspector has access to potential referrals from the Construction Company. And, since the customers already have a trusting relationship with the Construction Company, their customers will more likely trust the home inspector as well.

8. Leverage Joint Ventures for access to special skill sets.

If your business needs a special skill set to complete a project or business task, joint venturing may be advantageous. For example, if a real estate developer needs drawings for a development project, he can joint venture with an architect to complete the necessary drawings. In this example, the developer has access to the special skill set of the architect.

9. Form a joint venture with another company to expand your product line.

Companies with product lines often find ways to improve or add to their inventory. For companies that would like to expand their product line, joint venturing with another company may be a good tactic to try. For example, in 2012, BMW Group and Toyota Motor Corporation formed a joint venture for the joint development of a fuel cell system, joint development of architecture and components for a sports vehicle, and joint research and development of lightweight technologies. In this example, each company joint ventured to add to their product line.

In another example, an online clothing store owner wants to expand her product line by offering beauty products to her customers. She can joint venture with a beauty product wholesaler or manufacturer and almost immediately expand her product offerings.

10. Use a joint venture to expand your market share.

If you’d like to increase your market share, joint venturing can be beneficial. This works best with companies that are not your competitor. This is because since your competitor is in the same industry as you, your companies are more likely competing for the same customers. For example, an estate planner may form a joint venture with a divorce lawyer to increase his market share in the estate planning business. The divorce law firm is non-competing and the estate planner may have access to more potential clients, thereby increasing his market share over time.

Conclusion

Joint ventures can be a good tool for your business growth.  If you choose the right company (or companies) that share the same business culture, goals and values that your company does, your joint venture is more likely to be successful than working with people you have disputes with.

The key to succeeding with joint venturing is to know what your specific purpose is for forming the joint venture, as well as, the goals you want to accomplish. All decisions that you make pertaining to the joint venture should be mainly based on these two factors.