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July 24, 2022

How Joint Ventures Can Grow Your Sales

How Joint Ventures Can Grow Your Sales

Have you heard of a strategy called joint ventures within business?

If you haven't it may be worth something considering as a way of growing your sales and also growing your brand in tandem with a collaboration with another business.

At first glance, you may think it is where your business and its sales are being shared with another business, or potentially a shareholding agreement, but it is neither.

It doesn't affect your business structure whatsoever. Instead, it's an agreement between your business and another business to work together towards a common goal.

These are usually whereby each has services and products that compliment the others and can be used in a cross/upselling  initiative. This is known as a contractual venture.

joint venture agreement

Benefits of a contractual venture

When it comes to setting up a joint venture through a contract, it is the more popular and quicker option. There are other options that split liability and shares however these aren't common within the UK.

Contractual ventures are quick and easy to set up avoiding the need to establish and set up a separate entity. Both you and your partner company will also retain all of your own assets.

It also means you avoid any liability for any losses on the other side part and you are only taxed on your share of the profits of the venture.

joint ventures

Other joint venture structures

The other ways in which a JV can be set up here in the UK is through a limited liability partnership (LLP) or by a company limited by shares.

Most law and solicitor firms typically take up the form of an LLP. Primarily because most of the time they are controlled by managing partners and for this reason, it needs to be treated strictly as a partnership for tax purposes.

A company limited by shares is a separate entity, combines limited liability, and has public filings but gives you the chance for double taxation.

joint venture

Benefits of joint ventures

So what are the main benefits of going into a JV for your business?

Well, essentially it is a referral scheme.

Let's say you're a plastering company and you've got into business with a construction company. For each of their clients, if they need plastering and they don't offer the services themselves, they will refer them to you.

So you know each referral you get from your JV partner will be in direct need of your products and services, saving money on lead generation costs.

The other big benefit is that you both share the risk between yourself and your partner. It also means that any problems that arise are also shared between you both.

Therefore if you want to bring a newly merged service to the forefront sometimes this comes at a considerable cost if you were launching it yourself whereas these costs can be split between the both of you.  

Joint ventures are also extremely flexible. The contract between you and your JV is only temporary. And usually, only mean that you are cross-selling their services at a POS or passively.

This limits the resource and commitment that your business needs to devote to the venture; which avoids you from detracting resources from other areas of your business and other projects. 

joint venture discussion

Things to be wary of

Before you join a joint venture and during it, there are some things you should know.

Firstly, before you start the venture; ensure that the objectives that you both set are clear and subsequently are communicated as such to both parties.

They will not always be 100% clear but there should be a relatively understandable common goal. And you should never expect the involvement between both parties to be split 50/50.

There may be a heavy imbalance towards the amount of business party A may be referring to party B; due to the nature of the industries; and where they fall in respective project cycles. 

In summary

A joint venture is not something you should rush into. However, if you plan it correctly and have a good working relationship with the other business, it can be very lucrative.

 Today we have covered the basics of what a JV is, the benefits, and what to be wary of.  And this should be enough to get you thinking about if a JV is a correct route to go down for your business. 

If you want to know more about how a JV could help you and your business grow your sales; feel free to get in touch with me. 

We can take a look at your business to see what opportunities there are out there for your business to further expand and grow. We can also identify what style of JV might suit your business; and who some suitable partners may be dependent upon your product/services. 

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