We tend to hear business people throw around a lot of ‘business speak,’ words that essentially only they understand, lots of abbreviations and letters strung together, but what do they mean? Are they some kind of secret code or other language about what they are doing to our money – or each other’s money? Some of our clients have complained about not understanding this ‘business lingo’ so here we’re going to de-mystify one of those code words: JV, or Joint Venture.
A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify.
A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.
With individuals, when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are “co-venturers“.
The venture can be for one specific project only – when the JV is referred to more correctly as a consortium – or a continuing business relationship. The consortium JV (also known as a cooperative agreement) is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements, for one-time contracts. The JV is dissolved when that goal is reached.
So if you hear the business folk talking about “JV-ing” something or having a “JV” in the works, you’ll know exactly what they’re talking about. It’s nowhere near as complex as it is made out to be.
Always make sure that you make an informed decision in all cases,
All the Best,
Capital Corp Merchant Banking