Serial entrepreneur Kyle Krch is the founder of Krch Companies and Krch Realty, both based in Reno, NV. Highly skilled at identifying new business opportunities, Kyle Krch regularly uses joint ventures as a tool to leverage emerging opportunities.
A joint venture is a strategy in business whereby two or more companies which are unrelated come together to complete a common goal like entering a new market or constructing a commercial property. The parties to the joint venture write and sign a contract binding them to the project and committing each of them to contribute certain resources necessary for its successful completion. In many cases, joint ventures are temporary agreements.
There are many advantages to establishing a joint venture. The first is shared resources. Often, companies enter into joint ventures because individually, they lack the critical resources (capital, labor, technology, or market knowledge) necessary to complete a project. Coming together enables them to leverage each other’s capabilities and share the rewards. Another advantage is shared risk, since the companies pool resources, limiting their downsides. Flexibility is another advantage, since the companies remain separate entities, hence they can continue carrying out their primary businesses without having to merge with another company or give up control.
Joint ventures, however, are not without their drawbacks. One of them is limited outside opportunities. Parties to a joint venture often sign non-compete agreements to minimize the possibility of conflicts of interest among them. These agreements limit the parties’ individual spheres of reach. Other disadvantages are uneven distribution of work, especially where one party is unable to meet its requirements, and increased liability when the joint venture assumes a partnership structure where liabilities are borne individually by each partner according to ownership.
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