successful joint venture
The growing popularity of joint ventures, powered by the significant revenue benefits it brings to businesses, has prompted many entrepreneurs to jump into opportunities without analyzing the situation carefully.
Unfortunately, improperly conceived decisions might lead to fatal mistakes, hurting both brand image and profitability of your small business. If you are not familiar with the inner workings of joint ventures, it may be wise to consult with a joint venture expert, especially considering that the market dynamics in each industry are unique. Here are some of the worst joint venture mistakes entrepreneur must avoid:
1. Lack of Research. Like a marriage, finding the right partner is one of the most important elements in a successful joint venture. You need to understand all the benefits you expect from the joint venture, as well as what you can bring to the table. You’ll also want to ascertain your prospective partner’s relative strengths, such as business reputation and quality of products or services, to ensure it matches your own business model.
2. Penny-Pinching. For a joint venture to succeed, the offers from both parties must be lucrative enough to strike a commitment. A meager incentive plan is a waste of time and money because it will not motivate your joint venture partner. Be reasonable at all times, and do not let greed ruin your business.
3. Not Testing the Waters. Signing a long-term joint venture agreement can be a large mistake – for the simple reason that your strategies are not yet proven effective. If your joint venture flops, you have no choice but to continue at a loss or pre-terminate the agreement and pay for damages incurred to the other party. If you already signed a joint venture agreement, you may want to propose an escape clause in the event the venture is unprofitable. Ideally, you’ll want to negotiate for a short-term contract and conduct test marketing with some of your customers to gauge reaction and solicit their feedback. If you can tweak the problems, then it is time to roll out the joint venture in the bigger population for a long-term commitment.
4. Not Developing Backup Plans. It is faulty to assume that a joint venture will succeed until it does. Even though your joint venture is seemingly impeccable, there will always be some glitches, misunderstandings, or a series of unfortunate events that might befall the partnership. Always have a set of alternatives developed in case an unfortunate event happens. As they say, don’t put all your eggs in one basket. This is especially true when it comes to joint ventures.
5. Being Too Open. Joint ventures do not exist if there is no trust. However, it does’t mean you have to bare all and share your trade secrets. For instance, some entrepreneurs share their whole hard-earned client list to their joint venture partners, hoping that it will help build relations. Unknowingly, they are violating the privacy of their customers, as well as losing leverage over the partnership. The success of any joint venture lies in the details, hard work, and careful analysis of your business industry.