business plan joint venture

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What Is a Joint Venture and How Does It Work?

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As a small-business owner, you need a collaborative mindset to succeed. You need to develop solutions with employees, business partner, and investors on a regular basis. Sometimes, you might have a great business idea that requires expertise or resources from another individual or company. In this case, you might consider entering into a joint venture with that individual or company.

What is a joint venture?

A joint venture is an agreement by two or more people or companies to accomplish a specific business goal together. A joint venture can be structured as a separate business entity or simply grow out of a contract between the parties. Unlike a partnership, a joint venture is typically temporary, dissolving after the task is complete.

But how does a joint venture work? What are the possible benefits (and risks) of this kind of arrangement? We're here to help.

In this guide, we'll explain more about joint ventures, discuss the benefits and risks — plus, we'll review how a joint venture compares to other types of business entities as well as how to start one for your business.

How a joint venture works

Expanding upon our joint venture definition above, this type of agreement allows you to come together with one or more other individuals or businesses to carry out a specific project. Joint ventures are particularly common in the real estate, media, and technology sectors.

When it comes down to it, business owners enter into joint ventures to access new markets, tap into complementary skill sets, or combine resources. The concept of a joint venture can be confusing because there’s a degree of collaboration and independence.

Two or more people or companies come together in a joint venture for a specific purpose. However, the parties don’t have any legal responsibilities to each other beyond the scope of the joint venture.

Characteristics of a joint venture

Generally, a joint venture consists of each of the following characteristics:

The parties undertaking the joint venture are legally independent, with the exception of the work they do together during this collaboration.

The parties set out to accomplish a specific, mutually beneficial goal.

Both parties contribute resources, share ownership of the joint venture’s assets and liabilities, and share in the implementation of the project.

The joint venture is temporary (but can be short or longer-term), dissolving once the goal is reached.

Overall, the key to this arrangement is that both parties contribute to it and share in the opportunities and risks.

This being said, however, the contributions don’t need to be equal. For instance, one party might manufacture the product, and the other party might offer a distribution channel. One party might offer 70% of the money, while the other might bring just 30%.

No matter how you split contributions and profits though, each party is fully liable for anything that might go wrong with the joint venture.

As an example, let’s say two real estate developers launch a joint venture to build an apartment building. A bystander gets injured by construction debris that one of the developers leaves behind. Under the law of every state, both developers will share fully in the liability if the bystander sues, even though only one was responsible for the accident.

The only way to eliminate this shared liability is to form a legally separate entity for the joint venture (which we'll explain below). Although a joint venture doesn't require that you form a separate entity, many businesses choose to take this route.

Joint venture agreement

The terms of a joint venture should be documented in a written joint venture agreement. Although a written contract isn’t legally required to establish a joint venture, it's the best way to ensure that each party is committed to the shared effort and knows what is expected of them.

The contract should specify what each party will contribute to the joint venture, each party’s rights and duties, and how much each party will profit from the venture, similar to a partnership agreement.

Overall, just like any type of business collaboration, without a written agreement, joint ventures can fall apart due to disagreement between the parties, and therefore, it's worth taking the time to draft and agree upon a contract from the beginning.

Joint venture examples

Joint ventures can be useful in any situation where distinct companies have complementary resources and a shared goal. The examples of joint ventures you’ve read about might have been two mega corporations coming together, but small business owners can benefit from this type of arrangement, as well.

According to Washington, D.C.-based business attorney Joy R. Butler, “If you think a joint venture is the exclusive territory of Fortune 500 companies, think again. Joint ventures offer the option of pooling resources with others, so you don’t have to go it alone. Your joint venture might be as straightforward as sharing a customer list for a combined marketing campaign… or providing original content for a website.”

Here are some joint venture examples:

Two mobile phone companies agree to share their network.

A transportation provider and network provider join forces to provide Wi-Fi on the transportation platform.

Multiple real estate developers work together to build a shopping complex.

A restaurant teams up with a big distributor to get their products into supermarkets nationwide.

Two car companies pair up to conduct research about fuel efficiency.

These examples are all inspired by real-life joint ventures.

For instance, BMW and Toyota formed a joint venture in 2015 to develop a vehicle powered by hydrogen fuel cells. And back in 2009, Vodafone and Telefónica joined hands to share their mobile network infrastructure across parts of Europe, a deal that allowed both companies to save millions.

Joint venture alternatives

Although joint ventures may seem similar to other types of business arrangements — and sometimes the term "joint venture" is used interchangeably with terms like "partnership," joint ventures are unique.

With this in mind, it's important to understand how joint ventures differ from other business arrangements:

Joint ventures vs. partnerships

A general partnership is a specific type of business structure where two or more people govern a company together. The partners share in the profits and losses of the business.

Unlike a joint venture, a partnership is typically designed to last indefinitely. Joint ventures are usually temporary and initiated for a specific project, though they have more permanence than a simple licensing or distribution agreement, particularly when larger companies are involved.

However, there are some similarities between joint ventures and partnerships, the main one being liability.

“A joint venture is similar to a partnership, but courts typically distinguish between them by finding that joint ventures are usually for one single project or transaction, whereas partnerships typically are longer-lived,” explains Professor Michael Molitor of Cooley Law School at Western Michigan University. “But in any event, whether it is a partnership or a joint venture, the partners or joint venturers will be personally liable for the business’s debts.”

Joint ventures vs. franchises

In a franchise, the parent company grants a license to run a business using the parent company’s name, brand and operating methods — some examples include McDonald’s, Subway, UPS and other low-cost franchises .

Usually, a franchise is a long-term arrangement, and the franchisee pays an initial fee to the franchisor for the right to operate the business. Additionally, the franchisor exerts a certain degree of control over the franchisee’s business decisions. In a joint venture, neither party is in “control,” and both contribute toward a shared goal.

Joint ventures vs. licensing

Licensing is similar to franchising because the licensor permits the licensee to use the company’s name and logo. The licensee manufactures products and pays a royalty fee to the licensor for the rights to use the brand.

With joint ventures, on the other hand, both parties work together to reach a common goal and assume equal liability should something go wrong with the project.

Joint ventures vs. mergers or acquisitions

In a merger, two companies combine to become a single business entity. Sometimes, two companies of similar size come together, like Exxon-Mobil.

Alternatively, a large company could acquire the assets of a smaller company. The purpose of a merger is usually to capture new market share, and an acquisition is often used to buy out a smaller competitor.

In contrast, the purpose of a joint venture is to achieve a common goal, and each party maintains its independence.

Joint ventures vs. qualified joint ventures

A qualified joint venture is a partnership that’s run by spouses, each of whom participates in managing the business.

For tax purposes, the IRS allows each spouse to file a Schedule C for their portion of the business income and losses, in the same way that sole proprietors do.

Benefits and risks of a joint venture

Before we explain how to form a joint venture, you might be wondering about the benefits — and the risks — of such an arrangement. This type of collaboration seems simple enough, especially in comparison to the other business arrangements we listed, so, is there a reason why you wouldn't agree to a joint venture with another business?

In short, there are two sides to consider before agreeing to a joint venture with another business or individual. Let's start with the possible benefits:

Benefits of joint ventures

Your business can gain access to markets, resources, people, capital, technology, etc. that you wouldn't have otherwise.

You can reduce competition — especially if you're working with a direct competitor.

By working with another individual or business, you can more easily accomplish a goal or objective that would have been difficult on your own — which hopefully leads to an increase in profits.

You may be able to bypass time-consuming business license or regulatory requirements by working with a company that has already met those requirements.

You can designate a specific part of your business to work on a joint venture project with another business, without having to completely combine your organizations.

Risks of joint ventures

On the other hand, of course, there are possible drawbacks associated with entering into this type of agreement:

You may find it difficult to work with the other business and have to sort through disputes.

The joint venture could end badly and result in wasted time, effort, money and resources.

The project or goal you've taken on through the joint venture could end up failing.

You can open yourself up to additional liability and other legal risks by working with another business (especially if you don't create a separate entity for the joint venture).

As you can see, there are both advantages and disadvantages to forming a joint venture and you'll want to weigh these points against one another before deciding if this type of arrangement is right for your business.

How to form a joint venture in 5 steps

As we've explained, companies or business owners commonly form a joint venture to access new markets, gain an edge over competitors, or tap into complementary resources. Therefore, if you think this type of arrangement may be a worthwhile opportunity for your business, here are the steps you'll need to take to form one:

1. Find a partner

First, finding a joint venture partner (or more than one partner for larger joint ventures) starts with clearly defining your objective. For instance, perhaps you’ve developed a new product but lack wide distribution channels to get it into stores. You can ask fellow business owners what distributors they use and do some independent market research. Then, reach out to different distributors to gauge their interest in a joint venture.

This being said, you should evaluate the people who you'll be working with both in terms of their skills or knowledge and their cultural fit. Obviously, they must be able to prove the reach of their distribution channels.

However, you should also assess how committed they are to the final goal. Can you trust the people in charge? What’s the financial condition of the company, and what are their financial expectations from the joint venture? Does the firm have any other commitments or conflicts of interest that would hurt this arrangement?

When trying to find a partner, you should be prepared for a lot of negotiation and back and forth in the process of forming your arrangement. You might need to exchange production schedules, customer lists and other proprietary details with your would-be partner, and they’ll need to share their own information.

To protect the confidential information of everyone involved, it’s a good idea to prepare and sign a mutual nondisclosure agreement.

2. Choose a type of joint venture

After you've found a partner, your next step will be to structure your joint venture.

As we've discussed, there are two ways to do this:

Form a separate legal entity for the joint venture, such as a corporation or limited liability company, with each party having an ownership stake in the new entity.

Operate under a joint venture agreement without creating a separate legal entity. This is called an unincorporated joint venture.

Just as is the case with forming a joint venture itself, there are both advantages and disadvantages to the two structure options.

Forming a separate legal entity for your joint venture is the more expensive and complex option. If you form a corporate joint venture, for example, the joint venture will be responsible for filing and paying its own business taxes. However, having a separate legal entity also provides more legal protection if something goes wrong.

The faster, less expensive option is to get started with a simple contractual arrangement. In this case, the joint venture doesn’t report any profits of its own and doesn’t pay taxes on its own. The profits flow through to the respective parties’ tax returns.

If you’re exploring a joint venture for a narrowly defined purpose where liability isn’t much of a concern, it might be fine to get started this way. For a more complicated joint venture, on the other hand, it’s safest to establish a separate legal entity.

3. Draft a joint venture agreement

Once again, no matter what type of joint venture you create, you should draft a joint venture agreement that contains all the details of how it will be run. You can start with a joint venture agreement template, like the one shown above, to create your own agreement for your specific arrangement. Depending on the business you're working with and the risks associated with the joint venture, however, you might also decide to consult a business attorney for assistance.

This being said, at a minimum, your joint venture agreement should contain the following information:

The purpose of the joint venture.

Formation process (i.e. if the arrangement will be a separate entity or established by contract).

How the parties will allocate profits and losses, which need not be equal (though an outside claimant is free to sue either or all parties).

Each party’s contributions, which need not be equal.

What duties each party is responsible for to ensure the joint venture’s success.

Meeting schedule to decide on important matters.

Voting rights of each party.

When the joint venture will end.

Overall, when you're drafting and signing the joint venture agreement, it’s a good idea for both parties to have legal representation as part of the process.

4. Pay taxes

As with any profit-seeking enterprise, you must pay taxes when you’re part of a joint venture. As we mentioned above, the taxation of your joint venture depends on how the arrangement is structured.

If you form a separate legal entity, any profits of the joint venture will be taxed based on the entity type. For example, C corporations pay a 21% flat income tax rate on business profits, and shareholders pay taxes again on dividends. LLCs, on the other hand, are taxed as pass-through entities, which means the business income and losses are reflected on each owner’s tax return.

Unincorporated joint ventures are similar to LLCs in terms of tax treatment. The profits of the joint venture flow through to the parties to report on their individual tax returns, in line with their respective share of the profits as outlined in the joint venture agreement.

If the parties to the joint venture are corporations, then each corporation reports the joint venture income on their corporate tax return. An unincorporated joint venture doesn’t itself complete a business tax return.

5. Follow other applicable regulations

Finally, you'll want to make sure you follow any other regulations that might apply to your joint venture at the local, state, or federal level.

For instance, if you’re “borrowing” employees from either company that is a party to the arrangement, you’ll need an employer identification number and to follow other labor laws. Depending on which industry your joint venture belongs to, you might need a business license to operate.

And if you’re considering a cross-border joint venture, a host of international regulations come into play that might limit your ability to operate in other countries.

The bottom line

Joint ventures can be beneficial, even critical, to making a business idea a reality when you need someone else’s resources, market knowledge, or skill set to accomplish a specific project. However, a joint venture also opens you up to risks and liability, particularly if you don’t form a separate legal entity for it.

Therefore, as we've discussed, if you decide to enter into a joint venture with another individual or business, it's important that you understand the possible risks, as well as draft a thorough agreement to help mitigate those risks, in order to put your endeavor on the best path to success.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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How to Write a Joint Venture Business Plan in 2023

A joint venture business plan is a document that defines a business arrangement between two or more companies. Just as with a normal business plan, this plan also includes numerous sections and extensively describes the aim, companies, and responsibilities of each company in the joint venture. This plan also outlines temporary activities that help to attain specific goals.

Coming together to form a joint venture is nothing new in the business world. However, the real deal is to have an arrangement that equally protects the interests of each party so that everyone in the joint venture can put their best creative foot forward. Have it in mind that the best way to guarantee all parties understand their obligations and are fully participating is to put together a detailed joint venture business plan .

Although each company in the venture can put together the business plan, a legal review is often recommended to validate if the plan is legitimate. These plans are also known to be above and beyond a standard business plan. Most often, the plans will vary based on the specifics and interests of each party in the arrangement.

Steps to Write a Joint Venture Business Plan

Forming a joint venture involves several critical steps that begin with identifying and analyzing a viable joint venture partner to agree with. This sort of agreement requires well-detailed documentation and other allied/ancillary agreements. To write a solid joint venture business plan, here are steps to take;

Step 1: Write a Detailed Company Profile

Although this wouldn’t be the first page of your joint venture business plan, it is often recommended you start the writing process by first providing a brief description of each company involved in the joint venture. You have to include the management teams of each company, the resources, or goods available, and every other detail vital to the joint venture.

Consider creating a profile to briefly describe the partners in the agreement. You should also outline the expertise of each company and the reason for inclusion in the joint venture. You may also have to write a statement on the purpose of the joint venture as well.

Step 2: Spell Out your Marketing Strategies

The next step will be to discuss the market strategies you intend to leverage to achieve success for the joint venture. Just as with a normal business plan, it needs to define the market the goods and services are meant for. This section will also need to contain a thoroughly done analysis, graphs, and all other vital information that describes the market and why the joint venture will attain success.

Most often, companies in the agreement are advised to cooperate on this section to put together an analysis from each partner. Have in mind that the length and detail of this section will depend on the purpose of the joint venture; a competitive analysis may also be necessary.

Step 3: Input your Financial Projections

Note that every joint venture business plan is expected to include financial projections. While this may be the final section of the business plan, it will include information specific to product prices and cost of goods or services sold, and possible expenses from the activities.

You may need to include Pro forma financial statements in this section. Note that these statements provide a formal look at potential profits and let banks or lenders properly evaluate the venture’s possibility for success. Other statements or documents may also be included in this section.

Step 4: Your Executive Summary

Although the Executive Summary will be the first page of the joint venture business plan, it is always recommended you write it last. This page of your joint venture business plan provides a concise view of the business agreement. Depending on the joint venture activities, the section of the business plan will span anywhere from a few paragraphs to a few pages.

Important Clauses to Include in a Joint Venture Business Plan

A joint venture business plan is the bedrock of any joint venture. It outlines the objective and purpose of the joint venture. Have in mind there are ideal clauses a joint venture agreement is expected to contain. Here are very important clauses that should be inserted in the joint venture business plan:

Definitions

It is critical for every business plan to have a clause that defines all the necessary terms in the plan. This is primarily to avoid any form of misunderstanding and misinterpretation in the plan. Have it in mind that certain words or terms are given confining definitions for the purpose of interpretation of the plan. This clause will help guarantee a mutual understanding between the parties as to what a certain term means.

Parties to the Joint Venture

A joint venture business plan is meant to identify all the parties involved in a joint venture. Have in mind that there is a possibility that the original party won’t be the investing party, and the investing party may be the parent company of the original party. In such circumstances, this clause is very necessary to ensure that the joint venture agreement is binding to the investing parties as well as the original parties.

Nature of the Relationship

This is one of the most vital functions of the joint venture business plan. This clause in a business plan is meant is to outline the nature of the relationship between the joint partners, whether the parties owe any contractual obligations to one another, or whether the arrangement is just a contractual relationship where each party remains at arm’s length.

Business Objectives and Purpose of the Joint Venture

Note that this clause outlines the purpose why the joint venture was established. There are numerous reasons why businesses enter into a joint venture, from expanding their markets to completing a specific project. The purpose of the joint venture will need to be extensively considered before proceeding with finding a joint venture partner.

The Structure of the Joint Venture

This clause will have to include details about what structure the joint venture will be, such as an LLC, LLP, or incorporated. This clause shall also contain the details of the formation of the joint venture thereof. It shall also mention the registered office and the location where the joint venture will be carrying out its business.

Parties’ Contributions

This clause will note if the work will be split 50/50, who’s bringing what to the table, and what you can expect from the other person or company. Outlining this in your joint venture business plan in detail will ensure that all partner’s expectations are aligned. This is to ensure that each party understands what they will be committing to the venture, and also to ensure that they are bound by that commitment.

Distribution of Shares

The shareholding of all the partners will have to be outlined under this clause. Note that the distribution of shares is a very important aspect as the shareholdings will more or less dictate the proportion of ownership among shareholders.

Note that distributions of shares must not be 50:50; they can vary depending on the agreement between all parties. The shares can be distributed by a mutually agreed ratio or based on the capital contribution of the parties.

Rights and Obligations of the Parties

Indeed every party in a joint venture has certain rights that they can exercise and certain obligations. In the joint venture business plan, this clause will have to explain in detail everything that is expected from the parties. This is to limit or avoid future disputes and misunderstandings.

Joint venture business plans will need to explain who will manage the venture and take care of its day-to-day operations. It will also specify different levels of approval for different types of decisions.

Some joint ventures agree to establish a management committee instead of appointing the board of directors where the joint venture has been entered into for a particular short-term project. The mode of management needs to be explicitly outlined in the joint venture business plan.

Representation and Warranties

Note that these are statements of fact made by the parties entering into the joint venture. Representations and warranties are more or less made before entering into an agreement and such representations and warranties will also have to be mentioned in the joint venture business plan.

Representations and warranties are necessary so that the parties have adequate and vital information about each other such as financial standings of the parties or the loans taken by the parties, pending litigation, etc.

Indemnity Clause

Indemnity is a legal obligation on the parties to compensate the other party in case of breach of any contractual obligation. Most often, the party that suffers due to a breach of representations and warranties is entitled to be indemnified for the losses. Have it in mind that the indemnity clause will have to be fair, mutually agreed upon, and well balanced. The language and scope of this clause will also need to be clear and precise.

Dispute Resolution

In all business arrangements, there are bound to have disagreements and issues. While these issues will not always lead to litigation, it is recommended that all parties agree on a mechanism to deal with such situations.

Each party in a joint venture can be from different jurisdictions and governed by varying laws. Therefore the mechanism to resort to in case a dispute arises will need to be mutually agreed upon by the parties and explicitly noted in the plan.

Non-compete clause

This is a very important clause to include in a joint venture business plan. Depending on the nature of the agreement, it might be necessary to note that the two businesses are restricted from directly competing with one another, at least for a stipulated time. However, the non-compete clause will need to be reasonable otherwise it might be treated as a violation of a person’s fundamental right to trade.

Confidentiality

Within a joint venture agreement, parties are expected to disclose certain vital information concerning the company. Note that this information can be related to technology, trade secrets, or intellectual property. The information in the wrong hands might cause the party to incur massive losses.

This is why this clause is very important in a joint venture business plan. The clause may also need to provide that the information disclosed for the joint venture should never be used for personal gains.

Force Majeure

This clause is used to provide relief and protection to a party in a situation where the party is unable to meet some of its obligations. Note that this inability to fulfill obligations may be due to events that are totally beyond the control of the parties. The event could be a flood or an earthquake or a fire so on and so forth.

Termination

You need to understand that not every joint venture survives long and is often terminated. Owing to that, this clause will have to be included in the joint venture business plan. The termination clause centers on instances, breaches, or the occurrence of which the joint venture will be terminated.

Exit Mechanism

Even while still under an agreement, there can be many reasons why the parties would want to exit the joint venture. This could include short of funds or the joint venture going into a loss for some time. It is very common for a party to want out of the joint venture, maybe due to certain unresolved issues. Owing to that, the exit mechanism will need to be noted in the joint venture plan.

Deadlock Resolution

Deadlocks tend to arise when the parties in the joint venture have equal powers and are finding it hard to agree on a common conclusion.

Note that things like this can lead to disagreement especially when neither party is ready or willing to surrender their powers or accept the other party’s decision. While this cannot be entirely avoided in a joint venture, you should establish a mechanism that will help the parties to come to a common agreement or to resolve the deadlock.

Financial and Administrative Record Keeping

All parties in the joint venture must collaborate on maintaining their financial records. They also need to decide the process of administrative record keeping. While this may not be necessary, it is good practice for joint ventures to work with one accounting firm that is agreed upon by all members. This will help to limit the risk of any conflict of interest or complications in the future.

Intellectual Property

For joint ventures that will produce intellectual property that is of potential value to each of the parties, this clause is very necessary to avoid the risk of one party attempting to take advantage of the other’s intellectual property. This clause in the joint venture business plan should note who will own any new intellectual property created by the venture, and the extent to which the parties are permitted to use that property outside the venture.

More on Business Plan Tips

Successwise

How to Set up a Joint Venture

Have you ever had a great business idea that you instantly dismissed because it requires resources or expertise from a different individual or company? You’re not alone—and you shouldn’t be afraid to admit it.

Whether you like it or not, some businesses need a collaborative mindset to succeed. You need to go outside your comfort zone, look at the industry as a whole, and ask yourself:

• Whom can I partner with to accomplish my business goal?
• Who is a good fit?
• What are the benefits and risks?

This is what a joint venture  (JV) is all about .  It’s an agreement between two companies to work together to achieve a certain business goal. Now that could be to attract new customers, enter into new markets, or help launch a new product, whatever.

So joint ventures can be really powerful in helping your small business to grow rapidly.

Now let’s look at how to form a joint venture. The process you’ll undertake to identify the right joint venture partners and how to put your plan into action.

The types of joint venture relationships

Joint ventures come in two main forms:

1. COOPERATE WITH ANOTHER COMPANY WITH LIMITS.

This is when you make an agreement to collaborate with another business with limits and specifications. For example, you’ve launched a promising product and a larger company would like to distribute it to a bigger market. You can agree to form a joint venture based on a contract.

2. SET UP A SEPARATE JOINT VENTURE BUSINESS.

If you want to take things to the next level, you can create a separate joint venture business, where each party owns a percentage of shares and agree on how the business should run or operate.

Now how can you decide between the two? Start thinking of these things:

• What’s your goal? Do you want to create a joint venture with limitations? Or are you open to flexibility?
• How much protection do you want for your business?
• How much money can you spend on building this relationship?

When making your decision, think about the pros and cons. What happens next if the venture is a major success? How about if it goes wrong? How much risk are you willing to take?

If you’re still doubtful, don’t rush things; seek legal advice from a professional. They will give you tips on how a joint venture can specifically affect your business, and how much profit can you gain or lose from it.  

How to Start a Joint Venture? Our 10-Step Process

Step 1: evaluate whether a joint venture is helpful for your business..

Will it be helpful or are you just being impulsive in making decisions? Setting up a joint venture can make or break your business. You have to make sure that your decisions will drive business growth, and are not only driven by emotions.

Consider the following:

• Check what other businesses are doing. It’s time to do some  competitor research . How many of them are in a joint venture relationship? Is it helpful for them? Are they gaining traction? Did anything change when they teamed up with another business through a joint venture?
• Take a closer look within the business. Assess if a joint venture can fill the gaps of your business. Do you really need help from another business? Or can you restrategize and fill the gaps on your own?

If you decide to set up a joint venture, it may help your business upscale and generate more profit.

Many huge corporations have joined forces with great success. For example:

• Ford and Toyota had a joint venture agreement in 2011 to produce and sell hybrid trucks on the market. Toyota took care of the production through hybrid technology, while Ford took care of advertising and promotion as one of the leading brands in the US.
• Microsoft and General Electric (GE) teamed up through a joint venture in 2011. They launched the Caradigm Project together, which aims to integrate Microsoft healthcare intelligence products with different GW health-related innovations.
• Samsung and Spotify also formed a joint venture together. In 2018, both parties had a deal to make Spotify more accessible to Samsung device users. A year later, they both decided to include Spotify as a pre-installed application on most Samsung phones, even giving new users a six-month subscription for free.
• Successwise, my company, teamed up with Systemology for a joint webinar. We sent invites to both of our lists to promote our certification programs. We each have very similar target audiences and almost everyone who needs Systemology’s services needs ours and vice versa.

Overall, joint ventures are created for win-win success.

Step 2: Choose the right joint venture partner.

Sure, you might think that forming a joint venture is a great idea. But really, it won’t be beneficial if your business is not in the right hands.

Just like in any business relationship, both parties should be the right fit and aim for the same goal.

But let’s say the market is saturated , and there’s a whole bunch of businesses interested to work with you, how can you choose your JV partner?

First, you can start answering the questions:

• Who had your customers before you did?
• Which businesses or brands is your target market also interested in?
• Who’s your ideal joint venture partner? (You can think of any popular business entity you want to work with.

I suggest you focus on brainstorming your ideal JV partner. Basically, you want to collaborate with someone that has skills, experiences, resources, and assets that complement your own. Are there specific characteristics you’re looking for?

Second, create a list of existing customers (who have their own businesses) and suppliers with whom you already have a long-term business relationship. You can also consider teaming up with your competitors or other associates. 

Then, once you have finalized your list, answer these questions:

• What kind of reputation do they have?
• Do you share the same business objectives?
• How open are they to collaboration? And do they have the same level of commitment as yours?
• Are their core values aligned with your business?
• Can you trust them?

Third, if you want to go beyond the list, and are keen to work with a new potential partner, you can come up with a decision through these questions:

• Do they already have existing joint venture partnerships?
• Do you have any idea about how they manage and run the business?
• Are they financially secure?

Before getting into a deal, it’s very important that you protect your business’s interests. Sure, trust plays a big factor in this partnership, but you have to make sure they’re worthy of your trust.

Step 3: Approach your potential joint venture partner.

Have you found your ideal JV partner yet? Now, it’s a matter of compatibility. You also need to do your part by showing your potential partner that a joint venture will be a great opportunity for both parties. Here are some tips on how to seal the deal.

Step 4: Grab their attention before making the proposal.

You don’t need to wait until you’re ready to make the proposal. Get their attention before you approach them. Do you like their products? Buy some of them. Are you interested in attending their free workshops and webinars? Sign up and participate. Make them know that you exist without expecting anything in return. This is a great way to build a relationship, even before a joint venture takes place.

Step 5: Share some of your complimentary resources.

Let’s say you’ve done your research and your potential JV partner lacks some resources that you can provide. If this is the case, go ahead and share your resources with them.

Step 6: Build Rapport.

If you’re in the same industry as your potential joint venture partner, building rapport must be smooth and easy. It’s a great common ground to start with. As you initiate conversations, share relatable experiences and just be you. Think of yourself as an acquaintance who wants to get to know more about someone else.

Step 7: Leverage your assets.

Everything should start with some research. Find out what assets they don’t have, and which ones are lacking. If your business has the capacity to provide them, make sure you leverage those assets to attract a possible JV partner.

Step 8: Personalize your pitch.

This is very important. Don’t send a templated pitch or you won’t get anything from your potential JV partner.

If you  personalize your pitch , they know it’s meant for them. They know that you took the time to get to know about them, and why it can be a great opportunity to join forces. Simply put, personalization gives you a better chance of closing the deal.

Talk about the potential partnership through their language. Mention areas in their business that need help, and prove why you’re the right fit to support them. And just make sure that this partnership will be mutually beneficial.

Step 9: Draft your joint venture agreement.

Even if a written contract is not legally required to create a joint venture, I highly suggest you draft one. Just like any business transaction, it’s important that the terms and conditions of your JV should be stated in a written joint venture agreement. This ensures that joint venture partners share the same level of commitment in the deal.

Now before anything else, you have to understand that your joint venture agreement should be drafted by a legal professional. You can find pre-templated joint venture agreements online, but it’s important that they’re tailored to your business. You need to consult experts.

The draft for your joint venture agreement should include the following provisions:

• The business objectives of the joint venture
• The type of joint venture
• Each party’s share or contribution to the joint venture
• Control and management of every joint venture party
• Details about how each party will share profits, losses, and liabilities
• How both parties will make use of intellectual property
• The role of the management and employees in the joint venture
• A confidentiality clause to protect certain commercial secrets of both joint venture parties
• Dispute mechanism between parties
• Procedures for termination of the joint venture
• Details outlining an exit strategy

Step 10: make the joint venture work.

If all the terms and conditions stated in the joint venture agreement are settled, it’s time for the fun part. You need to know how to manage and handle the relationship.

Here are some tips for building a good joint venture relationship:

• Give your JV partner a great first impression. It’s important that you get the relationship off to a good start. Show that you’re reliable and willing to help in case there are any problems or issues with onboarding.
• Communicate with your JV partner. Communication is an essential part of every joint venture relationship. It’s a no-brainer. Typically, you have to arrange regular, consistent meetings with business entities involved in the joint venture. Or at the very least, schedule regular virtual meetings if all the key people are working remotely.
• Be transparent. Do you want to know how to gain your JV partner’s trust? Just be transparent. Be open to sharing information and resources that can make the joint venture successful. Be honest with what you’re really trying to accomplish, and aim for the same goals. And if there are some internal issues within your company that may affect the joint venture, let your business partner know as soon as possible. The last thing you want to happen is to make yourself suspicious and lose their trust in you.
• Be open to changes. Whether you choose to cooperate with another company, it’s still important to become flexible. Consider plans and suggestions from the other party that can improve the way the joint venture works—even if it means that you have to implement something new or unique.
• Be fair. Most importantly, be fair. There’s no perfect joint venture. And I’m telling you, all partnerships can have conflicts. So if a conflict happens with your business partner, face it with fairness. Come up with win-win solutions instead of outdoing each other. Remember that joint ventures are mutually beneficial agreements. They’re not only meant to please you or make you successful.

How to Maintain a Successful Joint Venture

A successful joint venture depends on different factors. But most importantly, everything boils down to the collaboration between two parties. You have to work as a team. Here are some helpful tips for success:

Step 1: Strive for clarity.

Make sure that all the goals and expectations of the joint venture are clear and agreed on by both parties. If there are any issues, discuss them with your JV partner.

STEP 2:   Balance contributions.

Everything should rely on the joint venture agreement. Always remember to balance all levels of investments and expertise contributed by both parties.

STEP 3:   Manage the joint venture.

By manage the joint venture we mean consider the company culture and management style of both parties.  Entering into a joint venture can be challenging because no two businesses are the same. But it’s important to find the common ground in terms of company culture and management style to make the venture successful.

STEP 4:   Provide support and leadership.

Whatever type of joint venture you choose, make sure you  offer  substantial support and leadership. It’s always a give-and-take.

Make sure your team, and all business entities involved, fully understand what a joint venture is and how it works.

Be transparent with everyone involved in the deal. Allocate the right time to discuss the terms and conditions of the joint venture, how it will affect day-to-day operations and the end goal of the venture itself.

How to End a Joint Venture

For businesses who chose to cooperate with other businesses with limitations, joint ventures are expected to end especially when the goal is achieved or the project is finished.

But for those who chose to create separate joint venture businesses, there might be a few reasons why they have to be dissolved.

Some things change over time. A joint venture might become successful during its early stages, and end up unsuccessful due to consistent conflicts and unresolved issues. Whatever the reason is, if you decide that the deal won’t work anymore, you can base your next step on the joint venture agreement. It’s important that you know how to settle:

• Unbundling shared intellectual property
• Protecting business confidential information
• Settling who will be entitled to future profit from joint venture activities
• Identifying who will take charge of continuing liabilities

Dissolving a joint venture should be planned wisely. More importantly, aim for a friendly separation. Even if both parties are separating ways, you can still continue to trust each other and open any possibilities for potential collaborations.

Joint Ventures: A Tool for Win-Win Success

Joint ventures can be critical to your business’s success. The resources, assets, skills, or knowledge of other businesses can help them scale, boost their reputation, and earn more profit.

On the flip side, there’s also a possibility that it won’t work for you. So as I wrap things up, I want you to be 100% sure of what you’re entering into. Is your business prepared to enter a venture with another business? That’s up to you to answer.

Make decisions wisely. Choose a type of joint venture that will benefit your business the most. Make sure to pick a JV partner that shares the same goals and vision as you.

And while the joint venture agreement is active, do your part to make the partnership work. Reach the goal with your business partner and it will become a tool for win-win success.

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What Is a Joint Business Plan (JBP)? Benefits & Best Practices

By 8th & Walton | on October 2, 2022

From small businesses to large corporations, the most successful companies begin and stick with a clear business plan. When a company defines its goals, lays out a path to meet objectives, and agrees on financial spending and expectations, it creates a shared vision and accountability to succeed.

Many businesses experience greater growth when partnering with another business. In the supplier and retailer relationship, both parties working independently would be detrimental. To create a mutually beneficial partnership, they must begin by defining each company’s responsibilities, expectations, and needs in a joint business plan.

What Is a Joint Business Plan?

A joint business plan (JBP) is the collaborative process of planning between a retailer and a supplier in which both companies agree on short-term and long-term objectives, financial goals, growth, and shared business initiatives for profitability.

Joint business planning focuses on agreeing on common objectives and aligning on a single goal or set of goals. The companies in the joint business plan must work together to accomplish a shared vision.

What Is the Purpose of a Joint Business Plan?

For retailers and suppliers, having a joint business plan can create a win-win strategy in growing consumer sales. An effective JBP allows suppliers to build stronger relationships with their retailers so both parties can mutually support and benefit from each other.

When a retailer and supplier recognize each others’ needs and agree on common goals, they can share insights to support each other and improve sales, customer growth, and processes.

How Does a Joint Business Plan Work?

Two companies can come together with a joint business plan because they have one thing in common: a shared shopper . Whether it is a supplier partnering with a retailer or a children’s clothing company partnering with a toy manufacturer, having the same target audience is the first element that brings the companies together.

The companies considering a joint business venture should then share their individual business plans and discuss their mutual growth opportunities. This is where the general goals and areas of support can be defined. Specific tactics and category strategies can also be fleshed out in early discussions before moving to the formal process.

Once both companies are in agreement that the partnership will be mutually beneficial, the joint business plan can be created. Formal contracts are drawn up, approved, signed, and the plan is ready to be executed. Periodic reviews and necessary adjustments to the JBP are recommended as needed.

Benefits of Joint Business Planning

Why enter into a joint business plan with another company? The benefits can be not only financial but educational as well:

• Aligning goals.  For a retailer/supplier joint business plan, being aligned on goals creates clarity on all other areas of the business. Defining expectations on all areas from marketing to supply chain to sales goals leaves minimal area for questions. Agreeing on goals, no matter how and when they are measured, keeps both parties accountable and benefits both to meet expectations.
• Shared resources and exposure. Partnering with another company can bring a new audience and a new platform. In a simple retailer/supplier joint business plan, the retailer can introduce the supplier’s product to its core shoppers. At the same time, shoppers loyal to the supplier’s product or brand can be introduced to the retailer’s store and website for the first time.
• Greater return on investment.  By partnering with another company with a shared vision, the benefits above will provide a better ROI when the plan is executed correctly.

Joint Business Planning Best Practices

How can companies ensure their joint business plan is a good fit for both parties? These are some best practices to include in preparation for entering into the partnership:

1. Align Internally First

Before entering into a joint business plan with another company, all members of the business must agree on the benefits of the partnership. Recognizing the advantages and seeing the bigger picture is key. When employees are in alignment within the company, it will be easier to align with the partnering company on the shared vision of the joint business plan.

2. Create the Plan Together

When two businesses enter into a partnership, the joint business plan should not be built by only one. A company sending another a complete plan or just a form to fill out is not collaborative. Both companies need to build the plan from the ground up. Collaborating in the development of the joint business plan is just as important as executing the plan itself.

3. Set Specific Goals

Expectations for success in the partnership need to be specific. “We need to grow sales” or “production costs will decrease” are good goals, but too general. Keep specifics in your plan that are as specific as they are realistic. If one company wants to grow sales by 40% in the next quarter, this should be spelled out in the joint business plan so get early support or push back from the other company.

4. Assign a Metric to Each Goal

Putting a metric with a goal keeps the company accountable to the mission of the joint business plan. For example, if the goal is to grow sales by 40% in the next quarter, it would be wise to assign a weekly growth metric. If the metric is too low over a few weeks, the plan shows that action needs to be taken immediately in order to meet the 40% sales growth goal for the quarter.

5. Communicate Responsibility and Accountability

The joint business plan is the place to eliminate all guesswork. If Company A is responsible for providing labels to Company B, be very specific about the responsible parties. Clarify that the packaging coordinator of Company A will mail the labels to the warehouse manager of Company B on the first of the month.

6. Include Risks and Solutions

Planning for setbacks is key to planning for success. The joint business plan should include any possible risks or obstacles foreseen by either company. Having solutions in place for multiple scenarios makes the plan easier to execute.

7. Constantly Evaluate the Relationship

Joint business plans work better with trust, mutual respect, and a great working relationship. Keeping the relationship healthy between the companies and individuals relying on each other brings more success to the overall plan. Monitor the relationship periodically and work to resolve conflicts as they arise.

Joint Business Plans at Walmart

Walmart works with its suppliers to create plans for sales and category growth. The company relies on suppliers to bring insights to the table to spot trends and get in front of potential gaps in the business.

Back in 2011, Walmart created a joint business plan with Proctor and Gamble to pick up lost sales in air fresheners. This category was down over 2% across the chain, but P&G brought insights to Walmart on how consumers were purchasing throughout the industry.

Consumers had no problem going to Walmart for aerosol sprays for under a dollar, but would then go to specialty stores to purchase expensive candles in the same scent. Through communicating through the joint business plan, Walmart was able to create excitement around higher price-point items and show the shared shopper they could purchase the extra items in one store.

Positive business collaborations can be extremely beneficial in growing retail sales. Two companies sharing a common vision can build on each other’s best practices and support each other to mutually win at the register.

Suppliers looking for support in their Walmart business have found great collaboration with 8th & Walton. Our team of experts supports suppliers to improve reporting, analytics, supply chain, accounting, and more. To begin a great collaboration with us, request a free 15-minute consultation this week.

About the Author

8th & Walton consists of retail industry experts with a combined 200+ years of Walmart and Walmart supplier experience. Having helped hundreds of CPG companies in their efforts to be better supplier partners to the world's most influential retailer, the 8th & Walton editorial team prides itself on being a go-to resource for Walmart supplier news and insights.

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