More and more business are finding that the virtual world of business can be just as lucrative as the traditional employee-based business. In fact, more lucrative. How else can you rapidly expand into new markets, new regions and even new countries without hiring one additional employee. The balance of this article outlines the key considerations in deciding whether Joint Ventures are a viable growth alternative for your own business.
In my own experience, joint venture relationships have been the single most lucrative factor driving the growth of my businesses, with the most successful joint venture generating over $200 million in consulting fees that were split between the joint venture partners. Other joint ventures I have participated in have been responsible for tens of millions of dollars in additional net revenues in the bank. Yep, I do believe in the power of strategic joint ventures for most businesses!
Where To Start
Step one is to determine your own growth objectives. It is impossible to know whether you have made forward progress without first knowing what “forward” means. For some, growth of sales revenues is king. For others the only measure worth consideration is net profit. What are the elements of your growth plan for your business? Do yours include any of the following:
- Sales revenue growth
- Net profit growth
- Efficiency ratio improvements
- Staff size growth
- Pace of new product releases
- Customer satisfaction ratings
- Repeat customer sales volume
- Reduced error rates
- Revenues per employee
- Financial stability and liquidity
These are just a small sampling of factors business owners use routinely to measure the health of their businesses. If you have not formalized your criteria for success, now is the time to do so.
The second step is to identify those things that contribute most to your ability to achieve your business goals and those that prevent you from achieving all the success you would like. If you are like most business owners, you will probably list some or all of the following as impediments to your success or at least things that keep you from achieving all the growth you would like. The most common challenges reported include:
- Shortage of qualified staff
- Shortage of qualified management talent
- Shortage of cash to fund growth
- Inadequate processes, controls or technology
- Inability to get in front of a sufficient number of customers and prospects
- Not enough products or services to sell
- Too much strong competition
Well, the good news it that you can attack every one of these obstacles with carefully constructed strategic joint ventures, effectively leveraging the assets, talents, prospects and customers of your partners. Good joint venture relationships are the single fastest way to put your business in overdrive with the lowest financial cost and risk.
Characteristics of a Good Joint Venture
My experience is that most lasting joint venture relationships are stronger than the paper they are written on. In otherwords, while contracts are important, they are rarely sufficient to overcome “bad blood” between the participants. Just like a marriage, the partners must want the joint venture to succeed and be willing to “roll with the flow” when things get a little rocky… because they will get a little rocky somewhere along the way no matter how well the venture was designed.
So what are some factors that contribute to a successful and lasting joint venture? Number one…. all joint venture partners must see the relationship as a win-win relationship. If you enter into a relationship where either of the parties intend to take advantage of the other partner…. don’t waste your time. It will not last. In most of the partnerships I have participated in, I found myself working just as hard trying to make things go smoothly and profitably for my partner as I did making the business good for my own company. Good relationships take effort and diligence.
Another factor that contributes to a successful joint venture is how the objectives of the partners correspond to each other. In the best partnerships, the needs of one partner correspond nicely with the strengths of the other partner. For example, one partner may have “killer” high benefit product but a weak distribution channel, while the other partner may have a worldclass distribution network and a need for innovative new products to drive through that distribution channel. Both partners stand to profit substantially with minimal investment and risk by working together.
There are many other joint venture success factors I will address in future articles, but if you cannot get past these first two, then you probably do not have the basis for a successful, long-lasting joint venture.
Finding Good Joint Venture Partners
Now this section may strike you a little odd, but trust me, it works. Strangely enough, one of the first places to look for a homerun level joint venture is to your strongest competitors. If you can find the right stategic fit with a strong competitor, think of the advantages…. they already have something you want right in the niche you are wanting to hit a homerun in. They already know the “lingo” and already have either a proven product or a solid marketing and distribution channel. They are in the best position to immediately capitalize on what you have to bring to the table.
I know, I can hear you saying….. BUT:
- My competitor will steal my stuff
- My competitor will build their own thing and cut me out
- My competitor will take advantage of me
- My competitor will steal my customers
- etc, etc, etc
I understand. I spent years worrying about that…. over, and over, and over again. The fact is, if the joint venture is lucrative enough and the demand is high enough to keep both partners busy, these are not nearly as serious a risk as you might suspect.
The next place to look is in peripherally related but non-competitive businesses in your industry niche. For example, if you provide legal services, look for joint ventures with accountants, or insurance agents or other businesses that work with your ideal prospect.
There are quite a few other strategies for finding strategic joint venture partners that we explore when we are working with clients, but these should get you started.
Where To Go Next
There are tremendous rewards to be gained from good joint venture relationships. There are also risks to be avoided. A good joint venture can allow you to grow your business at a pace that you may have never imagined. In our case, we were able to increase revenue per customer by 500% within two years and total annual revenues by over 300% starting in the first year.
If you decide to tap into this source of new revenue, you can go it alone or work with someone that has done it successfully many times before. Given the impact this can make on your business, I recommend you consider a guide… like us. We can minimize your risks and maximize your return on investment and get the benefits flowing rapidly to your business. Give us call. Let’s see if it makes sense for us to partner to make strategic joint ventures work for you and your business.