Select Page
6 min read

While there are many great benefits from forming a successful joint venture partnership, they are not all benefit and no risk. There are also some concerns to be cautionary about. We’ll take a look at some of them today.

Angering Current Customers

First off, whenever partnering with another company you are sharing the reputation with and either directly or indirectly recommending that other company. You are saying that this company is worth me partnering with, so you should patronize them too. Your customers may already have preconceptions about that company, and if they are negative they may view your company in a more negative light for partnering with them. That is why it’s a good decision to always

do your research on a company prior to forming a joint venture partnership with them.

Further, in cases where you are sharing the marketing for potential email or print mailing lists, do NOT just give your list of customers to the other company. This is a good way to anger all of your current customers. They trusted you with their information and you either literally or figuratively sold it to another company that in their eyes, just spammed them. Not good. Instead, to encourage your patrons to join another companies email list, do just that, encourage them.

You can put an opt in checkbox on the sign up form, so they can check a box if they would also like to sign up for the other companies list at the same time. Make sure this is an opt-in and not an opt-out; or in other words the default option should be to sign up only for your list.

A second way that you can encourage people to join is to put a link in the email blasts you send out. You can also include a blurb about why the other company is great and why they should consider joining their list. In this way, only those patrons of yours that wish to receive emails from the other company actually do. Any other way is forced, is considered spam, and can even be considered illegal in some areas.

Intellectual Capital

Another caution to worry about is intellectual capital. This is a concern both with existing capital as well as intellectual capital created as a result of the partnership. Once the information is created or shared it’s ownership situation is fluid. This is where a strong Joint Venture Agreement and possibly a Non-Disclosure Agreement may come in very handy.

Clearly lay out what information should be shared prior to getting into a full agreement. Do not share more than you are comfortable sharing and do not give up information that gives you a competitive advantage. Once it’s shared it can be considered public and anyone can then use it.

Make sure you also determine who owns any intellectual capital created as a result of the partnership. If flyers or promotions are created, do both companies own the rights to it, or just one. If a company wants to tweak the promotion to use with a different company after your partnership has ended, is that okay or not?

Insufficient Funding

Many joint venture partnerships, just like businesses, can fail because they are under capitalized. Be sure that in your initial agreement you layout who is investing what, as well as what that investment is going to be used for. Further, explain what happens if reinvestment is needed. Your partner may want to be more or less aggressive, you don’t want your funds to be used up in the first week of a partnership and then sit there wondering how to move forward with conflicting views. That money was basically just wasted. Furthermore, don’t over-invest in a partnership because you don’t want to waste how much was invested so far. This will only damage your business. Know your limits and do not exceed them. This is where a good exit clause in your joint venture agreement comes in really handy.

Poor Communication

In a case of joint venture promotions or marketing, be sure that there is a plan for informing employees. All employees of both companies should be able to accurately and consistently communicate the same message. Be confident in your message prior to the start of your promotion and have a plan of execution to make sure everyone is on the same page. As mentioned in a previous article, when finding a joint venture partner you will want to seek out companies with good organizational health as this will help aid this process.

Poor Follow Through

A good joint venture plan can easily fail if one of the parties doesn’t follow through on their commitments. Don’t expect and hope your partner has the same ambition that you do. Ensure that tasks and timelines are clearly laid out and put checks and balances in the agreement for both parties. When all else fails a good exit clause will let you get out before things go too haywire.

Too Close of Competitors

One final caution is partnering with someone who is too close of a competitor. These rarely develop into good, stable, or profitable partnerships. Aside from worrying about intellectual capital, there will likely not be enough trust between both partners to get a meaningful promotion worked out. If you do, it will likely be short lived. It could be useful for a short promotion with a proximity competitor for an event. Beyond that I would not advise it, as it will confuse patrons, you could end up being taken advantage of, and as mentioned the partnership will likely not work out in the end anyway. Just avoid it.

In the end, there are several cautions to be aware of when forming a joint venture partnership. The majority of these concerns can be eliminated with a strong Joint Venture Agreement and the rest can likely be avoided with common sense. With some good planning and a little considered skepticism, you can end up creating a great joint venture partnership that will yield dividends for a long time.