The Art of Joint Ventures

If you've ever listened to any of Jay Abraham's material you could be forgiven for thinking you know all about Joint Ventures (JVs).  Either that or you're in that group of people that don't know anything about JVs.  Whichever group you are in learning more about 'The Art of Joint Ventures' could dramatically improve your earning ability.  Let's start by defining a JV, so we're sure to be talking about the same thing.

Wikipedia defines a JV as an agreement between two or more parties to undertake economic activity together by creating a new entity.  This definition usually only applies to large scale enterprise such as the Fuji Xerox joint venture and is distinct from a strategic alliance which does not involve ownership.  For the purposes of this discussion I will define three separate classes of JV.



JV Class # 1: A Strategic Alliance
A strategic alliance is an agreement for two parties to co-operate toward a common goal while remaining separate entities. 

JV Class #2: Host / Beneficiary Relationship
A host beneficiary relationship is the type of JV popularized by Jay Abraham and takes the form of a host entity allowing a beneficiary entity to market to it's customers or clients.  Again no equity is exchanged typically and profits are shared according to negotiation between the parties.

JV Class #3: Equity Joint Venture
A new entity is formed with share-holding by both the co-operating parties having an equity stake in the new entity.  Depending on what each party brings to the table the equity may be 50/50 or a larger stake and/or control of the new entity may pass to either party as negotiated.



For every type of JV it is very important to agree in advance the distribution of profit and the contributions each party will make and when.  Except for smaller joint ventures it is usually advisable to put this agreement in writing.

For larger JVs it can be necessary to have lawyers draft documents however in most cases this is unnecessary because of the cost of enforcing any agreement.  What is critical however is that each party is clear on it's obligations under the agreement and of the consequences should either party fail to perform them.  The art of putting together a JV deal then comes down to a mix of salesmanship and negotiation.

The first step for anyone want to JV with another is to think though the proposal fully from the perspective of the partner as well as your own.  The things you need to consider are the costs involved the potential profit as well as the risk to either party and how to minimize it.

Much of the art of creating JVs comes down to selecting the correct partner in much the same way as you would select a target market if you going to produce a new product. Once you've determined your ideal JV partner, you need to approach them in such a way that they are willing to give you the chance to present your ideas to them.

Getting an appointment comes down to utilizing the correct language to succinctly communicate the benefit that your proposal will offer and nothing more.  Never discuss the details of your JV over the phone.

Instead make an appointment where you can meet with them and show them a proper presentation.  If they ask you to disclose your proposal on the phone simply say you have to show them it, and that you'll only take a short amount of time and then leave it with them.

Don't ever try to pressure someone in to doing a JV.  If the other party is not sufficiently motivated to do the JV with you it may be that the timing is not right for them, or that you've not thought through your proposal enough, or that you're simply not communicating the value for them, or you're demanding to bigger slice of the pie.  No problem!  Just rework the proposal and keep trying.

The performance of a JV is another subject entirely and outside the scope of this article.  However I invite you to contact me, or to post comments here, with your experience.  I wish you the best of success for your JVs.