Joint Ventures & Partnerships: How to Negotiate Successful Business Arrangements

A joint venture involves combining the tools, resources, and expertise of two or more companies. This type of partnership can have several advantages, including access to new markets, opportunities for growth, shared risks and costs, and access to greater resources. However, partnering with another business can be complex, so it takes careful planning and good communication to negotiate a successful joint venture arrangement. Here are some practical pointers for negotiating a joint venture or partnership. 

Understand Each Other’s Expectations

In order for negotiations to be successful, it is important to know your and your potential JV partner’s expectations for the company. You want to know whether or not you and your prospective partner share the same strategic objectives. For example, one party may be looking to expand its customer network beyond the home market while the other may be more interested in moving into a higher-profit margin within the existing market. It is also important to consider operational synergy and what the roles and responsibilities will be for each partner. For example, one party may be better suited to deal with suppliers while the other has a better understanding of managerial duties. It is best to consider how you and your potential partner will work together to run the business so there is alignment during the negotiation process. 

Know What You Want to Accomplish

What is your end goal and what does success look like? If you don’t know where you want to take your business, how can you negotiate strategically in the right direction? Know your minimum outcomes and what you must obtain so you can be prepared to walk away if your goals are not met.

Create a Game Plan in Advance

You need to develop a detailed game plan before sitting down with your potential partner. How bad do you need this deal? Are you in a position of power or a weaker position? What value do you and your current company bring to the table? Every negotiation requires compromise so determine what issues are most important and deal-breakers for you as well as what issues you would be willing to compromise on. From there, develop a strategy that puts you in the best position to reach a win-win outcome. 

Know Your Counterpart

Spend plenty of time researching your potential partner and gathering information about their knowledge, skills, access to resources, company profits, goals, and values. Do you share some of these same goals and values? Is this person someone you could work well with to reach your goals? You also want to understand the negotiating style of the other party and their track record with past negotiations. Can this person be trusted? Are they an open and honest communicator? Knowing this information will enable you to enter the negotiation process with the right strategy.

Discuss the Details of the Arrangement

There are many different types of joint ventures and each has its own terms and conditions. Therefore, you need to negotiate every aspect of the partnership including who will have majority ownership, financial obligations, operational responsibilities, etc. You may need to negotiate each of these aspects in order to find something you both agree on. For example, if one of you wants to have majority ownership, perhaps the other will carry less financial obligations. It is important to negotiate and agree on every aspect of the relationship so you both have a full understanding of how this partnership will work most effectively.