When you're an entrepeneur with an idea, it can be sometimes very difficult to get it off the ground. You may be short on resources or don't have the know-how to implement your brilliant plan. Bu don't give up yet! Most businessmen in your position usually manage to go ahead with their big ideas by going into joint ventures. A joint venture is a limited form of partnership where two business entities come together to form an independent undertaking. This is mostly done so that the risks involved when starting a new business are highly reduced and that resources would be used to maximum efficiency.
Joint ventures also provide a lot more than spreading around the risk between partners and enable efficienct resource management. There are several other reasons why joint ventures are formed. Here are some of them:
a) Better market penetration: having an established partner in the target demographic or location is a great boon for those looking to increase the sale of their wares. The usual arrangement is that one partner uses its already in place selling infrastructure to distribute the other partner's products.
b) Geographical considerations: Global companies are always looking to lower the risks of entry into a new country. This is why joint ventures with home-grown corporations are usually the rule when an international company is first getting into the local market. These companies benefit from the unique knowledge their partners have about local market conditions and laws. They also allow for them to utilize beneficial laws that only apply to native citizen's of that country via their association with their partner. The local partners benefit by acquisition of foreign know-how and access to international assets that can help support them in the marketplace.
c) Company development: Sometimes a business just needs to grow – however, as anyone can tell you, expanding a company can mean quite a few growing pains: lack of funds, knowledge, and people. A joint venture can help a business develop the safe way – it diversifies its holdings without a large amount of risk, employees are trained by their contact with their counterparts, and it helps restructure the company for even larger growth.
Now, with all of those advantages, you're probably interested in starting up a joint venture yourself. However, you'll have to do a bit of self-evaluation. Ask yourself if you can operate smoothly with a partner out of your sphere of control and whether you are willing to give your all to a partnership – hesistant participation and being a control freak are two ingredients to a catastrophic relationship, whether they be in business or personal life.
The next thing you should look for is the perfect partner – know what you're looking for and do your due diligence; background checks are your friend and help you avoid unscrupulous people who'll just take advantage of your relationship. The next thing is to come up with a joint business plan and to have a lawyer draw up the papers.
Joint ventures are actually pretty easy to understand and are a great help fo any developing company. So go out and look for a partner!
Joint ventures are a regular occurrence in the business world. This mostly because they provide a wide array of benefits for any prospective company, both large and small. First is that the sharing of resources between two companies can highly lessen the usual amount of risk that one of them would usually face if they did it on their own. Another benefit is that the cross-pollination of information between two companies can lead to accelerated product development and new breakthroughs.
Financial support is also a great benefit; entering a market or a introducing/producing a new product can cost quite a bit of money and spreading out the cost between two or more sponsors can make sure that the losses aren't catastrophic if it falls through.
As can be seen, forming a joint venture can be very profitable for a company. The thing is, for a partnership like this to prosper, you need to have a good partner. Having a partner that doesn't pick up his part of the burden is even more of a liability than going it alone and a partner that is actively sabotaging your business relationship, whether intentionally or unintentionally, can be a tremendous problem for a company. This is why it's important to screen your prospective partners.
So what should you be looking for in a potential partner? First of all, the company needs to have strong leadership. A solid hand on the keel can help integration between two companies be a lot easier. Indecisive leadership or an unclear chain of command can cause problems like conflicting orders or lax discipline that can spell disaster for your partnership. Always do a background check of the head of the company for possible problems personality conflicts.
Secondly, take a long look at the other company's corporate culture. A lot of potential problems can crop up when your company's laid-back style clashes with a the fast-paced one of your partner's. Your employees will be interacting and mingling with each other and creating a good rapport between them will be important. Envy and jealousy can throw a monkeywrench into this – not to mention expectations may not be met on both sides. Try to adjust or choose a more appropriate partner for your company.
Thirdly, the business side comes into play – draw up a list of what you need your partner to do. If you're looking for a distribution arm, check your prospective partner's market penetration and capabilities on delivering the product. If you're looking for R&D, look at the company's track record on developing technology. Always have a set idea of what you want, that way you won't be disappointed when you're looking for your partner to deliver the goods.
A company's track record is usually public record for the shareholders' benefit and if not, it's child's play to have a background check done on a company. When you think about it, all of these can be summarized into one sentece: know who you're going into business with. Knowledge is power and that's the key to becoming successful in a joint venture.