Partnership and Joint Venture Decisions - dummies

Partnership and Joint Venture Decisions

By Dawna Jones

When you are limited by time, money, resources, or expertise, partnerships and joint ventures can be of tremendous value. In a joint venture, two companies agree to combine their resources to accomplish a specific task, and the venture exists for a specific time period. Joint ventures provide companies large and small with expanded capacity to reach new markets or to market products and services.

Partnerships are formed when two or more people combine expertise to run an enterprise. In a partnership, an ongoing working relationship is established. Ben & Jerry’s Ice Cream is a good example of a well-known U.S. partnership.

Trust, mutual fairness, and enough differentiation to create value are the ingredients that make either of these arrangements work.

Success in a joint venture or partnership is based on what you want to get out of the relationship and then whether the values between the involved parties are compatible. To assess the value of entering into a partnership or a joint venture, ask these questions:

  • How can the other company help us? What does it bring that we value? What strengths does it have that complement ours? The answer identifies the value, strength, or benefits you expect to gain.

  • How can we help the other company? What do we bring that the other company values? From its perspective, what does the arrangement offer in terms of added value, strength, and benefits?

Each party answers these questions on its own; then the two parties meet to see how their answers match up. By combining the two lists, you can see how closely matched the perceptions are. Focus on whether your companies can support each other in your endeavors. Through reciprocity, you both gain.

After you work through the points to determine whether yours is a match made in heaven but before you ink in the agreement, give yourself a night’s sleep. Doing so gives the team time to pull any uncertain points forward for discussion. If things look and feel as good as they did the day before, then you likely have a relationship that will work.

Without a good working relationship between the two companies, the partnership or venture simply won’t fly. Trust and commitment are two central ingredients to making cooperative working relationships work. One way to determine how strong these qualities are in your partnership is to consider how your two companies will handle situations in which things go wrong.

If the answer is to blame the other guy, your partnership or venture is in trouble. If, however, the two of you can have a conversation, lay the issues on the table, find a solution, and then move on, you’re closer to a relationship that will work when things go sideways.