Common Joint Venture Risks And Effective Solutions

Considering all possible joint venture risks carefully before potential partners finalize their agreement is essential. This should continue throughout the lifetime of the partnership. The process of partnering with a different business is not always a walk in the park. However; the time investment for a full assessment is worthwhile to ensure the partnership runs as smoothly as possible. Both sides need to fully understand the risks involved with integrating personnel and the relevant financial fundamentals of the each other’s businesses.

What are your objectives of the joint venture?

It’s important to communicate the objectives of all partners with the shareholders. Otherwise an unknown or unidentified conflict of interest may arise. Keep in mind that during the planning stage of the partnership, each side is in a “wooing phase” and on their best behavior. Enjoy it while it lasts. Be prepared for the end of the honeymoon because it will end. If goals, responsibilities and roles are not clearly outlined, a more assertive partner may attempt to impose their objectives and goals absent a thoroughly planned agreement.

Some of the more prominent joint venture risks include; differing ideas on how to raise capital, financing agreements, and spending philosophies. Be sure to consider whether the JV operations will be capital-intensive or labor intensive. One partner might prefer heavy investment in machinery or technology for a competitive edge. The other may prefer more investment in labor-intensive techniques to avoid tying up capital.

Other common risks may involve personnel and staff integration. The two teams are perhaps worlds apart in terms of expertise, and technical sophistication. Often it requires expensive training to bring the other side up to speed. The new JV partners may also encounter a deep-rooted resistance to change from their respective staff. The risks abound when employees remain too entrenched in their previous philosophies, corporate culture and work environment. Territorial battles ensue over the new system, and non-compliance often leads to increased staff-turnover.

Joint venture risks related to intellectual property and financial information

Another area of contention is how much information to share. It may not be necessary or required to provide the other partner full access to something like production secrets. A number of joint venture marketing agreements are between two related, but not directly competing businesses. A soft drink manufacturer might enter into a partnership with a confectionaries producer. In such a partnership, the soft drink manufacturer would not necessarily find the need to share their soft drink formula and vice versa.

Joint venture risks dependent on capital spending can arise when one side refuses to share exact details related to their financial backers. Sometimes there is reluctance to offer the full details about future investors out of fear the potential partner will contact the investor directly. This leaves their prospective partner concerned that they do not have a true financial picture.

Being aware of the potential risks involved in a joint venture partnership is not enough. Efforts should be taken to protect each company as much as possible from the adverse effects of poor planning and the lack of a thorough evaluation. Building the right relationship from the start is ideal. This should minimize ill feelings that could develop between the new teammates. Adequate research, negotiation and compromise are necessary when developing shared objectives in a joint venture.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Legal Tips to Keep in Mind for Joint Venture Partners

Joint venture marketing is just as it sounds, the involvement of two or more businesses or entities partnering up in order to build up a solid base of customers and to profit. It then becomes a legal organization. However, instead of a partnership being formed for the purpose of individual profits or gains, the joint venture may be formed for the intention of developing a product, marketing strategy or intellectual property (the mind’s creations such as inventions, symbols, works of art and/or name and images used in commerce).  The two categories that it breaks down into are: Industrial Property (industrial designs, trademarks, geographical indications and patents for inventions) and Copyright (all literary works, musical works, films and all artistic works. Copyright also includes all involved in the artistic such as performing artists, broadcasters and producers).

A contract protects the partners of a JV marketing agreement

As with any agreement, a contract is drawn up to protect all parties involved and to lay out certain stipulations. This is effective in that each business understands their responsibility, their rights and their expected participation in the agreement. There are many points to consider when entering into a contractual agreement because whether the partnership is short or long term, there are key elements that should be enforced or included in the agreement.

Key components of a joint venture marketing contract

To protect all parties involved, key considerations often included in a Joint Venture contract are: assignment, amendments, confidentiality, dispute resolution, dissolution, governing law, indemnification and intellectual property. The contract could also include the bookkeeping and records, mission statement, bank accounts, capital contributions, division of profits and losses, place of business, management duties, expenses, term and termination and other business interests.

Each of the topics mentioned above could be a subsection in the contractual agreement between the participating joint venture partners. When the agreement is broken down into sections, you can see the legal implications and obligations that would fall into each separate category. Detailing each section legally, with mutual consent, this signed document will become a binding contract that can be upheld in a court of law if necessary. Contracts, state partnership and commercial transaction laws govern joint ventures in the United States. The partnership is also responsible for federal income tax. If foreign countries are involved in the joint venture agreement, the parties are also subject to the laws that are in place within those countries, as well as the international trade laws.

The key details of the joint venture marketing agreement

Compensation, partner shares, and income should also be determined on the agreement, so that no discrepancies will occur. When these clauses are included (whichever ones you choose from the list above) and rules or guidelines are written in each section, the joint venture marketing agreement becomes legally binding once all parties involved sign it. Business must always be separated from personal feelings and attachments. Meetings should be held between the involved parties to discuss what the expectations of each are. All parties should be involved in discussing and contributing to the terms set in the agreement.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Joint Venture Agreement: A Separate Company or Contract

Sometimes the goal of a joint venture marketing project is to create an entirely new brand or type of technology. Since this is an expensive venture that requires many different types of resources, JV marketing agreements are usually a great way to accomplish this goal. However, there are many aspects that need to be considered when doing this. The main decision that needs to be agreed upon by both companies is whether they are going to remain two separate entities marketing a shared product, or if they’re going to come together and create an entirely new company and market it under a different name.

To Merge or Not

If the two businesses joining together already have established reputations, the best option might be to remain as two separate companies. The company names already have brand awareness and will sell the product more successfully than a new name. Including both well-known and established names on the product could increase its credibility even more.

However, it is possible that the companies will feel that the product will sell more successfully under a different name. This is the case when the product being created is not one that’s usually sold by either business. Giving the new joint venture its own name will allow it to build its own reputation. In this case, it makes sense for the companies to join together and create a new company under a third name.

When two businesses considering a joint venture don’t have well-established reputations in the market, creating a new company may prove more beneficial. If one or both of the companies have gained negative reputations for any reason, omitting their respective names on the new product or service will probably serve as a better choice. If the company names are simply not well-known, having a new name will not hurt the marketing campaign. This way the new joint venture name will have an opportunity to build its own reputation.

Nevertheless, if it’s believed that the product or service will enjoy great success, it might also be decided that using the individual company names instead of a new name might be better. This way both of the companies will receive publicity for the new product, increasing their individual reputations.

Consider the risks of the forming a new company

There are risks regardless of whether the companies involved in the project decide to join together as a new company or remain individual companies. As a brand new company, the name will not be known on the market, which has the potential to hurt the marketing of the product. However, keeping the original company names has risks as well. If one of the companies is more well-known than the other, they might receive all the credit for the product’s creation by the public. But if one of the companies has a negative reputation then the other company’s reputation could be hurt by it. Before making any decisions on the matter, there are a lot of factors that need to be considered.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Legal Advice for Joint Venture Marketing

Like almost any business venture, legal advice is generally used when forming a joint venture marketing agreement. This is the wisest way to go to protect the company’s assets in the event the business venture is not successful. While a well-planned out venture generally has no reason that it should fail, it is always important to protect the company. On the rare occasion that two businesses are only going to interact for a very short period of time and there are not any high risks involved with the project, then legal council is probably not necessary. For the vast majority of joint business marketing ventures, however, it is wise to include legal advice.

Choosing an attorney

Selecting an attorney for the joint business marketing project can be a difficult process. The company that initially comes up with the plan will probably want legal advice to help them draw up the outline for the project. However, it is not a good idea to approach the other company under the assumption that the project only needs one attorney. The offer for the other company to have its own legal council should always be extended. This way the second company doesn’t need to fear they’re going to somehow be tricked. The second option would be for neither company to use their own company’s legal counsel, but instead hire outside, impartial legal advice. This way the cost of the attorney could be split without one party being unfairly represented. However, hiring an outside attorney will increase the cost of the project. If both companies already have their own attorney, then that is usually the best option to choose.

The most important stage of any joint venture is to have legal counsel present when both parties sit down to draw up the plans for their project. When making agreements such as which company is going to pay for what and how much revenue each company will earn, it’s very important to have binding legal contracts that cannot result in an unfair advantage to one party or the other. If both parties are sharing the cost of legal counsel, then it is obviously only necessary for the one attorney to look the plan over. If each party decides to have its own attorney, however, it is important that both companies’ legal counsel look over the plan and that they both agree that it will work.

After the initial plan has been approved by both companies and the legal counsel, it is up to the individual businesses to decide whether they wish to keep the legal advice on board for the rest of the project. Obviously if both parties are using company attorneys, then it only makes sense to keep them on hand. However, if both parties are comfortable with dismissing the legal counsel after the plans for the business venture have been agreed upon, then doing so will save both companies money. In the end, the most important thing with legal advice is that both parties feel comfortable with the situations they are agreeing upon and that both companies’ assets are protected.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Effectively Negotiating a Joint Venture Marketing Agreement

After you’ve decided to enter into a joint venture and found a potential partner, the next step is the negotiation. “Give and take” is important to understand in the negotiation process; without it a successful agreement cannot be made. The power of a joint venture is only as strong as the negotiation behind it.

Tips for Effective Negotiations

Face-to-face interaction and tactics are key factors in a successful negotiation. Equally important is the proper layout and preparation of goals, benefits and risks of the venture. Keep in mind that in any successful negotiation, both parties walk away feeling they will benefit from the arrangement.

Perform extensive research on the type of business you’re preparing to negotiate with. If possible find out what problems they have and what their profit margins and resources are. Use the Internet as a research tool, read industry publications and talk to the company’s customers or employees. This research will help you be more effective in the negotiation process.

Learning everything you can about your potential partner is important, but being prepared to offer important information about your business is also important. Outlining the benefits of entering into a venture with your company for your potential partner as well as discussing what you hope to gain from the venture is a good strategy for negotiations.

Speaking of “give and take,” you should go into the negotiation process prepared to compromise. You should have the best- and worst-case scenarios along with the benefits of each case. As you begin the process, start off with the best outcome you hope for first. As the negotiation process matures, prepare to compromise, but do not lower your standards.

By leveraging existing resources instead of creating new ones, this will help both parties keep costs down as much as possible. If the venture does not work out as planned, both partners will not lose if they use their combined resources. Also pooling your resources can be an effective way to deal with each other’s shortcomings; what one company lacks the other company excels in.

Some other helpful tips are honesty and transparency between partners. Starting your venture on the right foot will ensure the longevity of the partnership. Regular contact with your partner is essential in making sure your current arrangement is going as planned and making adjustments as needed. Effective ventures are essential in business growth, profit increase and growing the customer base.

Put it in Writing

All successful negotiations end in writing a contract. The contract needs to include the overall goal for the joint venture, a timeline for the venture and the benefits each partner hopes to gain from the agreement. If a timeline is not solid, put a date down to revisit the JV partnership. Also include all fallback options. In the event the partnership does not work, both parties can make a clean break. A well-prepared contract is paramount. Each party should think about hiring a legal representative to help protect you and your potential partner’s interests.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Defining the Relationship in a Joint Venture Marketing Plan

Business is all about developing relationships and forming partnerships to get your business off the ground. A poorly planned joint venture is destined to fail from the very start. One way to ensure this doesn’t happen is to create a joint venture agreement that is aligned with the goals of your JV.

Reciprocal

Reciprocity is very simple. If you’re good to your partner and create revenue for them, they’ll want to reciprocate. The referral mechanism for a reciprocal agreement could be as easy as displaying your partner’s business cards or adding its logo to your marketing materials. You are basically saying you give your partner’s company your stamp of approval. Think about how your pediatrician can recommend a good nutritionist for your kids, or how many Wal-Mart locations have a McDonald’s inside the store; this is reciprocity at work.

In mid-July, American Airlines, British Airways and Iberia were finally able to announce their joint venture. The European Commission had approved their partnership which allowed them to expand their code sharing. The companies were able to sell their partners’ flights under their own name and flight number. This venture gives American Airlines more cities to sell flights to and from Europe.  British Airways and Iberia would be able to use American Airlines extensive network in Canada, Mexico, the United States and South America. This is an example of a multi-national company successfully designing a reciprocal relationship that should fit the needs of both organizations. However, small local companies can do the same.

Profit Sharing

Profit sharing also means risk sharing. When you decide to choose a profit sharing joint venture, you’re also agreeing to share half the risk and half the potential losses. To avoid confusion the contract must clearly state that both companies are equal partners. All profits, risks and loses are shared equally between you and your joint venture partners.

Delta Airlines and Air France/KLM put together a $12 million per year profit-sharing venture which would allow the companies to become a single carrier on North Atlantic routes. This offer also extends to a previous venture between Northwest and KLM which has been in place since 1997. This is the most advanced model of successful international of airline cooperation. The benefit to customers and the businesses are paramount. Where can you form a joint venture marketing agreement with a local partner that will answer the needs of your customers?

The Best of Both Worlds

Recently SkyWest and Virgin Blue Group signed a 10-year joint venture agreement which will provide Australia with up to 18 Virgin Blue-branded aircraft. This venture makes it possible for SkyWest and Virgin Blue to operate at a number of existing and new destinations in Australia.

If both reciprocal and profit-sharing agreements seem like a good option for your business, you’re in luck because a joint venture marketing agreement is completely customizable. All you have to do is put what you want in writing to be presented to your potential partner at negotiations. You may have to make some compromises, but that’s the case in most business partnerships.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Is it Time for a Joint Venture?

You may have heard about the popularity of joint ventures today and how business owners are using them to build a targeted market base and increase profits. However, you aren’t completely sure whether your own business is ready to undertake this kind of partnership.

If you are feeling a tad apprehensive about the idea, consider these factors to determine whether it’s time for you to take the next step in your marketing efforts.

What is Your Strategy?

Before you set out to find a JV partner, consider your own business strategy. While joint ventures can fit the bill for many business owners, they aren’t the right fit for everyone.

When you take the time to define your own business goals, you can see whether a joint venture is an appropriate strategy. It also helps to know your goals beforehand to ensure you and your JV partner are on the same page in terms of what’s best for both businesses.

What can You Bring to the Table?

Evaluate the strengths and weaknesses of your own company. Any potential partner will want to know how your business will benefit theirs in the partnership you form.

Know what you have to offer before approaching any prospective partners. By defining your own business needs, you’re better prepared to approach potential partners.

Where is Your Customer Service?

When you implement a joint venture, the idea is to grow your customer base quickly. Make sure your staff is prepared to handle an increased customer flow before you set out. Service training and adequate resources to care for more customers should be in place prior to a marketing blitz; otherwise, you may only succeed in frustrating new customers who will never set foot in your business again.

Are You Ready to Sign?

Before you begin a partnership with another company, it’s important to familiarize yourself with the legal aspects of this type of business alliance. No joint venture should ever be considered “official” until a contract is drawn up and both partners have signed on the bottom-line.

Before you begin searching out prospective partners, educate yourself about the common legal issues facing joint ventures so you’re ready to address them as soon as you locate another business interested in partnering with you.

Joint ventures can be an excellent marketing tool that will give you plenty of bang for your advertising buck. They’ll allow you to team up with other businesses for the purpose of increasing your targeted customer base and bottom line. However, a little preparation goes a long way in ensuring you are fully prepared to embark on a new partnership and manage all of the benefits and possible issues that might accompany your agreement.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Due Diligence in a Joint Venture

When you enter into a professional partnership with another company, it’s important to make sure that business is the type of entity you can trust and work with effectively. Joint ventures are the ultimate business relationship, uniting two or more companies for the purpose of marketing, increasing a targeted customer base and building profits.

If you want your joint venture to be successful, you must thoroughly evaluate your potential partner before entering into a professional relationship with them.

What is Due Diligence?

Due diligence is a process that is used to thoroughly research a business you’re considering for a joint venture. It may involve a number of steps, including legal obligations, research and investigations into a company.

It’s typically used by venture capitalists considering an investment into a startup company. However, it is also an essential process for anyone who is considering a partnership with another individual or business and wants to ensure that union is a success.

What is Included?

When you begin the due diligence process with a potential JV partner, there are a number of documents to research:

• Corporate records
• Financial information
• Background checks of business and owner
• Contingent liabilities
• Business plan
• Sales and marketing records

While this is a fairly comprehensive list, it is by no means exhaustive. For example, if your purpose is to ride the coattails of a larger, more established business; take some time reading online reviews of the company, its service, and the products it provides. The last thing you want to do is enter into a partnership with a company that has a poor reputation with the general public.

In addition to reviewing a company’s business plan; find out what the company expects from the joint venture you’re looking to start. Ask potential partners what their intentions are for the joint venture to ensure you’re both on the same page with the terms and benefits. Find out what types of marketing strategies the company has used in the past and which advertising tools they are most comfortable with to compare with your own advertising strategies.

It’s important to note that in the case of venture capitalists, the large majority of potential relationships that are investigated do not make it to the final contract signing. Issues may arise through the due diligence process that give pause to those ready to invest their money into other businesses. The same might be true for joint ventures that are properly vetted, but this should provide peace of mind in knowing the companies that do pass muster would be more likely to provide a mutually beneficial partnership.

Using due diligence to properly research potential JV partners is an important step in any successful arrangement. Keep in mind that your joint venture may be designed to go on for some time and involve a multitude of marketing strategies and shared financial arrangements. When you take the time to thoroughly investigate a company before agreeing to a professional relationship, you are less likely to face unpleasant surprises throughout your partnership.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

5 Steps to Ending a Joint Venture

All good things must eventually come to an end, and that includes your joint venture agreements. However, dissolving one doesn’t have to be a negative experience. With a little advanced planning and a lot of business finesse, you can call it quits and still stay professional “friends.”

Capitalize on these steps for ending a joint venture so that everyone is happy with the process.

Check the Fine Print

If you prepared properly at the beginning, you probably have guidelines in place for dissolving your partnership. Check your contract to see what provisions were made for ending the relationship, including the time frame you agreed upon, the division of assets, and how to handle future income the joint venture might continue to generate.

Consider a Buy-Out

The large majority of joint ventures end with one partner buying out the other business. If the JV is still profitable, but one partner wants out to pursue other avenues, consider a buy-out option. This allows the benefits to continue with the partner who still wants to play the game. The business owner with the two businesses may try to go it alone or recruit a new partner to help shoulder the workload.

Sharing Customers

If the joint venture partners have been sharing a particularly good customer, there may be some negotiation in order to determine how to handle the situation. It’s best to talk through this type of situation to continue to build trust between partners and ensure the customer is properly cared for. Your customer will also be more likely to continue to bring his business to the remaining partner if he feels the separation was handled amicably.

Keeping Confidences

It’s highly likely that confidential information passed between partners during the term of the joint venture. It is important to leave the relationship with the confidence that information passed between the two of you will remain confidential. You can create an ongoing confidentiality agreement that protects both of you indefinitely.

Future Assets

If your original joint venture contract did not address the issue of future income or assets, this is another issue you’ll need to discuss with your partner before dissolving your relationship completely. Determine who will receive future income and who will be responsible for future payments that might arise. This is another agreement that should be put into writing to protect the interests of both partners long after the partnership is dissolved.

Like any business arrangement, joint ventures typically sport a finite time frame. When the time comes to part ways, take the time to sit down together and go over any final issues that might arise. Put your new agreement into a written contract that can be used to hold all parties accountable for future transactions. This simple process ensures that everyone’s interests are properly protected long after the partnership has ended and that your professional relationship continues on a positive note for any future joint ventures that might arise.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

Tips to Coordinate a Successful Joint Venture

Joint ventures provide some of the best value for your marketing dollar today. By riding the coattails of a larger company, or combining resources with a business similar in size to your own, you can exponentially increase your customer base and your bottom line.

The success of your joint venture begins at the outset with the establishment of your JV partnership. We have tips to help you coordinate a successful venture right from your first contact with a prospective partner.

The Screening Process

The right JV partners will set the stage for overall success. To ensure you find the best possible partners for your arrangement, consider the following:

• The nature of the partner’s business and how well it relates to your own

• The reputation and history of the business

• The overall purpose and goals of the other business for the joint venture

• The ability to work well with and trust the partnering business

• The benefits both businesses will stand to gain from the joint venture

The more carefully you screen your potential partners, the more likely you’ll be to embark on a successful partnership.

The Legal Process

Once you find a prospective partner that meets your pre-screening qualifications, it’s time to deal with the legal aspect of the process. No matter how comfortable you feel with your JV partner, you want to have a full agreement put into writing and signed by both parties. Potential issues to address in the contract include:

• Management issues – who will manage what

• Availability and allocation of common resources

• Mutual gains and how they will be disbursed

• Accounting principles for the JV

• Taxes and potential deductions

• Specific business plan, including purpose and goals

There are a couple of options for drawing up a JV contract. First, look for templates online that have been specifically designed for this purpose. Second, hire the services of an attorney that specializes in business issues like joint ventures to handle the legal part of the process for you.

The Partnership Process

After the relationship is in full swing, there are a few factors to keep in mind to ensure your collaboration continues to motor along smoothly:

• Strive for regular communication between partners to assess the arrangement and make necessary changes

• Keep your word to your partner in all business endeavors, so a circle of trust is built

• Set a time-line to reassess your partnership and determine whether to continue or disband in favor of other potential arrangements

• Aggressively market your joint venture, using all possible Internet options, to ensure the partnership brings you the best return

Joint ventures are a popular method of growing a business today, but many companies are still shying away from the concept for fear of getting roped into an ineffective arrangement. With these tips in mind, you can rest assured your joint venture will be as successful and harmonious as possible.

Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.

To discover more Joint Venture Marketing Strategies join his free report on Joint Venture Marketing.

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