Why Creating a Joint Venture is Profitable
 While single small businesses are closing each day due to economic conditions, there is a way for them to stay in business by considering a joint venture to become more profitable.
A joint venture takes a complimentary business to create a ‘package’ of products and services that is more appealing to consumers as well as increase profits despite competition.
For instance, if a small computer sales shop is failing, they could form an alliance or partnership with a local computer repair shop. This would be a “win-win” situation where the two small businesses would combine their talents and expertise to provide a “one-stop shop” for their customers---and the profit margin would most likely increase.
Not only in the combining of talents does a joint venture increase profitability for both parties, but the parties also share their customer bases. By sharing customer bases, each business has the opportunity to gain new customers with the joint advertising of new products and services. The added plus to customers is additional credibility for both businesses.
As the old adage contends, “Two heads are better than one,” so often does the combining of two businesses as one joint venture create more profitability and competitiveness in the marketplace.
How to Create a Joint Venture that is Profitable
The first step in creating a profitable joint venture is to first analyze your business and what it offers---what it can “bring to the table”. This strategy not only helps to define goals, but also shows the ownership what is needed to improve their strategy against the competition.
Thus, the most important step in creating a profitable joint venture is to build a business model or business plan. A business plan should have been created at the start of the business. When considering a joint venture, the original business plan will need to be restructured to include what elements are missing and redefining the goals of the business.
Additionally, profit and loss statements need to be evaluated along with determining what money can be invested into the joint venture. Usually the cost is considerably less going into a joint venture than when you started your business because most operational equipment and other costs would have been paid for.
Along with the definition(s) of your business structure, goals, scope, and financial reports, a “dissolution of partnership terms” agreement should be written, allowing for either party to end the partnership if the joint venture is not performing as expected.
Finding a Partner for a Profitable Joint Venture
Finding a partner for creating a profitable joint venture is done after you have first defined your business plan, financials, and goals.
The process in finding a joint venture partner is much the same as when buying a small business. For maximum profitability, a partner in a joint venture should meet these standards:
- Provide products and/or services that compliment your business.
- Have a cooperative staff with established leadership.
- Have a portfolio of established and satisfied customers.
- Have well-kept financial records that show consistent profits.
- Have a well-defined and energetic goal structure that mirrors your business.
- Have a strategic marketing and sales program in place.
Tip: You can also hire a joint venture broker to assist you in finding a joint venture partner.
Steps for Making a Joint Venture Profitable
 Once you have found a compatible and complimentary partner, time must be spent to re-write the business plan for the joint venture. All costs but be predetermined as well as the depreciation or appreciation of equipment that are combined. Many a joint venture has not been profitable due to miscommunication and misappropriation of a partnership’s assets.
Take the time to schedule meetings with all principals of the business and form contracts that are well-understood and serve the interests of both parties. Do not assume that when problems arise during the course of the joint venture that “things will iron themselves out.” People have fluctuating moods, personal issues that could crop up, and other no-fault incidents that can jeopardize the partnership’s structure, goals, and profits.
Make sure the ground is covered by putting contingencies in writing as part of the contract to avoid misunderstandings or miscommunication. Think ahead to create answers to “What do we do if_______were to happen?”
Things to Remember when Forming a Profitable Joint Venture:
- Analyze your business structure and where it is lacking talent and expertise.
- Redefine goals and objectives and locate a business that will compliment yours.
- Determine your business’ profits, expenses, and equity in equipment prior to “going to the table” in a joint venture situation.
- Examine and check all references and financial documents of a prospective joint venture partner.
- Take the time to restructure the two businesses as one: define current goals and set future ones.
- Make sure the joint venture partner is cooperative and has a leadership structure in place to avoid miscommunication.
Helpful Websites for Forming a Joint Venture:
Finding a Joint Venture Partner that fits your business:
Joint Venture Partner Search:
Practical Advice for Business/Joint Venture:
DollarMakers Joint Venture Brokers:
Joint Venture Templates:
Creating a Business Plan:
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