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3 JV Risks and How to Avoid Them

By Christian Fea

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Published: 03Sep2009
Word count: 492
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Forming a joint venture can offer a flexible and easy way for two different business owners with unique businesses to work together and create more profit. However, a JV does not come without risk. There may be many pitfalls that come along with the responsibility and benefits of a JV. Here are a few and how you can avoid them.

1. Risk of Different Values

When two or more people work together, there are always two or more opinions, especially when it comes to business strategy and profit goals. Many times, business owners form a JV in the hopes of making an easy buck, but find that it is more trouble than anticipated when opinions differ on how to proceed with the JV strategy.

When you form a JV, you will likely need a great deal of diplomacy in order to communicate effectively with your JV partner, as well as flexibility in reaching joint decisions. Before you form an official JV, be sure you can talk openly with your potential JV partner and can easily get along, even when opinions are not the same. Trust is important as well. If you want a successful JV partnership, you and your partner need to trust each other to carry through on commitments.

2. Risk of Losing Money

Any business venture is a financial risk. You risk capital resources, including cash, to provide a product or service that the public wants to buy. And there is always a chance that you can lose money. A JV is no different. Be sure to do your homework before committing to a JV and calculate ahead of time whether the JV will be successful. That means performing market research, finding the right niche, planning for capitalization, and marketing your joint product or service smartly. This list is not inclusive and there are many other things to consider. But planning allows you and your JV partner to calculate and control the financial risk.

3. Risk of Losing Credibility

Choosing the right JV partner can be a big part of a successful JV. However, you can risk your own professional reputation and credibility by joining forces with the wrong partner. How? Say for instance that you are a successful professional attorney and you form a JV partnership with a CPA who has previously been investigated for fraud and is in jeopardy of losing his license. A simple association with someone with questionable character can hurt your own client base and cause current and future customers to look elsewhere for legal advice. Be sure you have a credible and worthy JV partner before committing to the venture.

Your potential JV is not a guaranteed success. You must take responsibility to calculate the potential risks and form strategies to reduce and control them, and in some cases, eliminate them. When you have done your homework and treat your JV as a serious business challenge, you will be on the road to potential profit and fortune.

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 Joint Venture Marketing Wealth Report.

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