Joint Ventures:
How to Leverage Other People’s Money

In general terms, leverage is when you use your assets to increase your assets. Without increasing your expenses or outflow, you want to increase your earnings and make your business more profitable. Sometimes you don’t have the money on hand to do this. In these cases, you may need to borrow funds, or to use funds provided by a business partner or investor.

Learn more about Joint Ventures

Some ways you can leverage other people’s money include:

• Have a business plan. Your business plan needs to be thorough and up-to-date, so that investors see you as a good risk. Investors are usually willing to take a risk if they know what they can reasonably expect. They also need to know what your vision is, and what you plan to do to make that vision a profitable reality.
  
• Form an LLC. One of the best ways to leverage other people’s money to make your business into a limited liability corporation, or LLC. In an LLC, one person retains control of the business as the sole general partner, and the others are simply investors. You share both profits and financial burdens, but not control. This helps you retain your vision for your company, and it lets the investors out of the responsibility of the daily running of a company.
  
• Grants. There are many grants for businesses. Some of these are from the government, some are from private corporations, and some from universities or research groups. You may be eligible for even more grant funding if you are a women or a minority, so be sure to check those categories. Do some research on the internet first, and don’t forget, this information is free, despite the large numbers of companies who will try to charge you for it.
  
• Venture Capitalists. Venture capitalists often work on a larger scale than angels or LLC investors. They are accustomed to finding enough money not only to start a business but to fund the marketing and other costs that will ensure that the business will succeed. Venture capitalists are committed to the success of your venture, since their investors’ success depends on it. For that reason, they may become very involved in your company—sometimes more so than you would like. You should decide beforehand whether you want their expertise in running a profitable business, or if you just want their money. They are very good at what they do, but they will not allow you the total control that other models will allow you.
  
• Personal connections. This is not the same as personal funds—remember, we are leveraging other people’s money. But if you have faith in your venture, your relatives and friends may want to get in on it, and they may have money to invest. You still want to protect yourself with a legal contract spelling out the terms, but if you are honest and work hard to make your business successful, it can be lucrative not only for you but for your whole circle.

Listen Up!
We are hosting a DollarMakers Joint Venture bootcamp in Regina on October 25, 2008. This bootcamp will help entrepreneurs and small business people make more profits, and learn how to joint venture with others. Visit the link above for more information.
It's well worth the price of attendance. -- Monty Loree


Questions this article talks about:
What are joint ventures?
Can Individuals and small businesses get involved in joint ventures?
How can I use a joint venture to make money?