Benefits and Risks of a Joint Venture

joint venture marketing

You may be hearing about more and more small businesses using joint ventures to explode their profits by effectively building their customer base. But is a joint venture the right choice for your company?

While you are the only one who can accurately answer this question, we can give you the factors necessary to make an educated decision. Check out these lists of the benefits and risks associated with joint ventures to find out if this business model is a good choice for you.

What is a Joint Venture?

Joint ventures can take on many looks, but the basic gist is that two or more companies come together to pool their talents, resources and customer lists for the benefit of all. The joint venture allows you to share advertising dollars for a more effective campaign and gives you the opportunity to ride the coattails of a bigger, more established company in order to boost your reputation and build your customer base.

Most joint ventures take place between related companies that share a similar target market, but do not compete directly in the goods and services they offer.

Benefits of a Joint Venture

There are many reasons to consider jumping into a joint venture with another small business, including:

  • Access to a whole new target market through your JV partner
  • The ability to reach a larger market base through pooled resources
  • The opportunity to capitalize on the established reputation of a more experienced business
  • The sharing of risks, as well as resources, to make your advertising dollar stretch further
  • Access to resources you may not have had in the past, such as specific skills your JV partner brings to the table that you did not currently have in your own labor pool

With so many excellent advantages involved in joint ventures, it is a wonder why more companies are not hopping on the bandwagon. In fact, you can find many joint ventures that already boast a track record of success, making these business models and attractive option indeed. However, JV marketing may not be the right approach for everyone.

Drawbacks of a Joint Venture

Before you jump into your first joint venture, it is important to assess the risks associated with such a business agreement. These risks may include:

  • Unclear objectives for the partnership, which may result in unmet expectations and hard feelings on both sides
  • Different objectives may result in the JV with the partners actually working against one another, using valuable resources and energy without bringing about the desired outcome
  • Partners are not sufficiently committed to the joint venture, which leaves one partner shouldering the bulk of the responsibility with decreased benefits

The moral of the story is that if you decide a joint venture is the right choice for your company, it is very important to define the terms of your agreement in detail and have both JV partners sign a written contract that commits them to those terms. With proper preparation and realistic expectations, joint ventures can provide a marketing opportunity that reaps much better results than an individual marketing campaign might.

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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