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Joint ventures help small businesses ‘leverage the power of large businesses’

When bids for Baltimore’s 21st Century School Buildings Program were announced, architecture firms Waldon Studio and Hughes Group were faced with a predicament – they each wanted to win a project with the program, which is meant to address Baltimore’s aging school system but were missing one key factor that would set their applications over the top.

For Baltimore-based and minority-owned Waldon Studio, it was an extensive K-12 education project portfolio, without which it would be difficult to win a school design and construction project. For Washington- based Hughes Group, it was access and proximity to the Baltimore architecture market.

But each firm had what the other lacked, and so they applied with the intent to create the Waldon Studio Architects Hughes Group Architects Joint Venture and ultimately won the bid to renovate James Mosher Elementary School.

Ravi Waldon, president and founder of Waldon Studio. (Submitted photo)

“It’s a very happy collaboration,” said Ravi Waldon, president and founder of Waldon Studio. “We like teaming up. It’s a great way to build our portfolio.”

Joint ventures, or when two companies come together to jointly execute a contract, are often utilized by small businesses to “leverage the power of large businesses,” said Eliot Wagonheim, a business lawyer who has helped companies set up joint ventures. Often, small companies cannot meet the bonding requirements of large projects and need access to a larger company’s capital to do so.

Joint ventures can result in a third legal entity or can be the result of a contractual relationship between companies that does not create a separate entity. In the case of the Waldon Studio Architects Hughes Group Architects Joint Venture, the firms used documents created by the Maryland chapter of the American Institute of Architects to form a contractual relationship. Then, they opened a joint bank account for the venture.

Joint ventures are different from prime and subcontractor relationships, which are seen in large government contracts, where one company works directly with the government as the “prime” contractor and another works for that prime contractor without directly interfacing with the government.

Joint ventures allow both companies a seat at the table – together, the companies are the “prime” contractor. Smaller businesses then learn from the larger company as they develop a business relationship and grow their portfolio. Joint ventures also allow larger companies to win projects that have incentives for small businesses or minority- or women-owned businesses.

“Joint ventures can be a great way for small businesses to increase their competency,” said Jimmy Rhee, Special Secretary of the Governor’s Office of Small, Minority & Women Business Affairs. “By partnering with a company that brings different skills to the table, they are able to learn and grow as they develop their portfolio of past performance.”

For Waldon Studio and Hughes Group, their partnership means an equal division of work, with roles that were clearly defined before the project even began. “We don’t want to feel like we’ve been brought on to fulfill a minority quota,” Waldon said.

For the renovation of the James Mosher Elementary School, Hughes Group has taken the reins on the conceptual design work, as it is the firm’s strength, said Waldon, and Waldon Studio has fulfilled more of the construction and project management requirements, due to the firm’s proximity to Baltimore.

Eliot Wagonheim, a business lawyer who has helped companies set up joint ventures. (Submitted photo)

Participating in Baltimore’s 21st Century School Buildings Program is the companies’ first project as a joint venture, but their partnership is about a year in the making and is built on similar goals. Waldon believes the joint venture between his firm and Hughes Group works because both firms are focused on community-centered buildings, like schools or worship centers, and are often vying for the same projects.

While Waldon Studio did not know it wanted to partner on this particular project with Hughes Group a year ago, joint ventures rely on strong connections that cannot be made in the crunch-time of an application period.

Wagonheim thinks of building connections in terms of surface area. “If you stay in your room and you don’t make contacts, you have no surface area and you’re unlikely to find that thing that nourishes your career,” he said. “You have to start building your network. Start thinking in the long term.”

Surface area may mean joining a trade association, attending conferences, having a presence on social media or even talking with a lawyer who frequently facilitates joint ventures. But more importantly, it means cultivating long-term relationships with other companies that have compatible visions.

Still, Wagonheim said, small businesses need to remember that when an opportunity for a joint venture or partnership comes around, they should do their due diligence to make sure the contract serves their interests, too.

“As tempting as the opportunity may be, you have to vet it, and sometimes your best move is to walk away,” Wagonheim said. “If you’re not prepared to walk away, you’re not prepared for the opportunity.”

Minority Business/Expanding Opportunities 2020 cover

Expanding Opportunities

This article is featured in the 2021 edition of The Daily Record’s Expanding Opportunities Resource Guide for Small, Minority and Women Businesses. Published in conjunction with the Governor’s Office of Small, Minority & Women Business Affairs, Expanding Opportunities explores diversity, entrepreneurship and innovation in Maryland’s small business community. Read more from Expanding Opportunities on this website or read the digital edition.

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