Forming a Joint Venture Marketing Partnership When Economic Crisis Hits

Copyright (c) 2009 Christian Fea

When most business owners and entrepreneurs think about forming a joint venture, it is usually during positive economic times when business prospects are good. But what about forming a JV during a recession or when an economic downturn affects the region of your business?

Case Study: When the Times Get Tough, Capitalize on a JV

That's just what Michael Henderson and Dave Harrison did. Bad economic times adversely affected their respective businesses when the building construction company they both depended on for a large percent of their livelihood went under and the business dried up. Rather than throw in the towel, they decided to team up and form a JV partnership.

Henderson was an experienced independent subcontractor electrician who went into business for himself in the 1980s. For almost two decades, he subcontracted electrical work for a successful home building company. While he completed electrical tasks on new homes, he worked alongside Harrison, another independent subcontractor specializing in plumbing.

During a particular subdivision home development project, the homebuilder suddenly went out of business and began liquidating in the middle of all the construction. That left Henderson and Harrison out of work and without future prospects, as they both depended heavily on the home building company.

Two Heads are Better Than One

However, rather than seeing the bleak picture and going out of business themselves, they took a positive outlook on the situation. They saw an opportunity to work on an upcoming large-scale construction project, but not individually. The projected called for both electrical and plumbing together. In order to bid on the project, they needed to pair up and register with the European Union and register to get a VAT, or value added tax, number. On a handshake, the two formed the joint venture, Henderson & Harrison, made a bid on the project, and won it. They have been working together ever since.

The two split the profits from their JV work 50-50. They did not work from a formalized written agreement, but just by a handshake. They say that a formal agreement is something they plan to draw up at some time because they do want to have a clear understanding of profit and asset division, and to determine the value of the assets, such as vehicles that have been acquired.

By matching talents and combining forces on bigger projects, they have both seen an increase in their income. Their business works because the dynamic of the two work in harmony. Henderson is the hands-on guy who supervises on-site projects with other subcontractors. With his technical plumbing knowledge, he is able to complete projects with exceptional quality. Harrison, by contrast, is the business partner who likes to meet people, make bids, and get the deals. They are both happy in their respective sides of the work they do through their joint venture.

The only thing they would do differently? They wish they could have started sooner. But only through a bad economic splash were they able to foresee a potential partnership, which has made them much more successful than going it alone.