For people who hear it for the first time, the term “joint venture” comes across as some kind of partnership. If you also got that impression, you are right. A joint venture is a partnership but not just between two people. It is the association of two or more people, companies or entities that want to combine their property, resources and expertise to create a business enterprise. This means that they will have joint shares on the company or in some cases the “product” or project that they have.

It differs from ordinary partnership in the sense that it is not always for the long term and unlike, partnerships, the resources may not become the property of the other. It all depends on how the parties agree on paper.

Joint ventures, you see, can happen even with companies that have already established themselves in the field. So why would they opt for a joint venture when they can certainly put up the project themselves? They lack the resources or one element in the mix. One example is perhaps two technology companies who each own a patent for a product and when these products are combined, they can produce one great product that they can sell. Because one cannot make the product on their own, the company will seek a joint venture with another to make it work.

Another example when a joint venture is called for is when companies want to expand to another country and they want to partner with a company that already has an established market in the country. This makes everything easier for the company and sometimes also cost-effective. The same goes for companies who want to put their products in the market and need the resources like factories and selling areas to launch their products.

Joint ventures also work for foreign companies who want to establish operations in a foreign land but cannot get a permit to do it. Some countries have strict laws against foreigner owning a business. Because of this law, some companies will seek partnership with a local company in order for their operations to push through. The same goes with companies who have problems with a language barrier and therefore need local companies to help them be introduced in the market.

Joint ventures are also sought in the most part because of financial constraints. Some projects can be really expensive to undertake and some products can take a huge chunk of a company’s savings, cash that they really do not want to risk in a new enterprise. Joint ventures provide these companies with the option to partner with another company and therefore, divide that risk and also divide the capital.

One thing to remember though with a joint venture is to seek a partner who you can trust and also someone that you share the same work ethic and vision with. Getting the wrong partner for this can spell disaster in the long run. So better make sure that you are making the right choice.

 

So you've got this business idea that you think is going to be really big – the problem is you don't have the resources to make it happen. Another situation is you've got everything set-up and all you need is a distribution channel. There are two ways you can go about in getting your product to the market: first is to set up your own distribution network, a work that would require a lot of time and effort, or you could go into a joint venture with someone who already has presence in the market or who has the capital you need.

Joint ventures are a regular part of today's business scene. This is mostly because of the advantages that it provides: a reduced entry risk into a market, it gives access to local or knowledgeable talent, it helps diversify a company's holdings, and is a less of a financial burden than going into it alone.

A lot of worldwide companies use joint ventures so that they may stretch their reach globally, partnering with their local equivalents so that they may be able into the market more quickly and more cheaply than they could on their own. This can also work on a lower level when a company who has no experience in a particular field goes into business with someone who's already in the market. This can be helpful for a small enterprise because it spreads out the potential losses and helps enhance your profit margin.

So, how does one go about entering into a joint venture? As is always true, one should not go into a partnership lightly. The first thing that you should think about is whether you'll be one hundred percent into the partnership. Remember that for something like this to be successful, you need to be willing to cooperate fully with your partner. If you're too much of an independent spirit to share leadership then this is probably not for you – but if you think you can rein in your pride in the name of profit, then go ahead.

The next part of setting up a joint venture is to choose the right partner. Start by drawing up a list of prospective partners and doing your due diligence on them – which means checking their backgrounds and history – have they been successful? How do they handle their employees? Are they in other partnerships and will they be detrimental to your interests? Talking it over with the company or person face-to-face is a good idead; it gives you a good gauge of their intentions and how they play the game.

When you've settled on your partner, it's time to get into the nitty-gritty. Drawing up a cooperative business plan should be first priority – remember to get them to contribute so that your operation runs smoothly. A good business plan can assure that you both profit. After that is the legal details – jointly retaining a good lawyer to draw up the agreement is a good idea so that everything is balanced. Checking on the contract with your own lawyer is a good idea, too, just to be sure.

And after that, it's putting ink to paper and you've got yourself a joint venture. Simple and direct, but it will require a lot of work – but the profits can be great.