joint venture marketing
joint venture marketing
There are many situations in the diverse world of business today that justify the need to enter into a joint venture marketing partnership. After hearing about joint venture marketing, someone might be excited about having their business transformed by creating an alliance with another successful and related business. However, the business world is full of rough-and-tumble personalities which will require you to tread cautiously in order to function efficiently and avoid getting the short end of the stick so to speak when it comes to a JV agreement. Here are several key points you cannot afford to ignore before entering a joint venture partnership.
Do the companies complement each other?
First of all, the potential partners should deliver a product and/or service that complements or at the very least is related to both companies. Obviously you’ll want to avoid partnering with a business that competes directly with your company’s products or services. Offering complimentary products or services in your new joint venture will go a long way to make the partnership a successful one. For example, home décor products would go well with a company that provides consumer electronics.
Does your potential JV partner have a compatible strategy?
The scope of the other partner’s strategy should not clash with yours. If you have a long-term plan in mind, it wouldn’t make sense to partner with a company that’s only in the market for the summer. Keep in mind the scope of your combined strategy will also influence things such as marketing plans, employee recruitment and training, and other short-term goals you may have for your business. Additionally, the combined strategy, whether it’s capital intensive or labor intensive will depend on the size of the businesses involved.
Another factor to take into consideration when reviewing whether or not you and your potential partner’s strategies are compatible is each company’s timeline. Know how soon the other partner plans to do some crucial tasks. Know how often they borrow or pay off loans. Without time lines, a business is just drifting with the current, lunging at any piece of business that drifts downstream. This is clearly not how a profitable business should operate. It’s also wise to crosscheck what customer base the other business already boasts. What quality is there and what room for improvement exists?
Is your potential JV partner financially sound?
Finally, the capital base that exists should be given top priority at the outset. Can you picture entering into a joint venture marketing agreement with a company that is going to declare bankruptcy tomorrow? Often, the integrity of both partners to the businesses will take a beating if one of the two declares that he cannot meet financial obligations. It’s highly recommended to have an attorney draft up an agreement to clearly outline which obligations, whether financial or otherwise, will be handled by which partner. That way, it’s not one person holding the reins of the agreement. The golden rule is being willing to treat the other partner’s business as if it were your own.
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.