Five Things You Have To Consider When Opting For A Joint Venture
Joint ventures are great ideas for business but it is not without its disadvantages. Some fail while others crumble against the weight of the discord. So before you opt to go into a joint venture, here are some things that you have to consider in order to make sure that you will have a successful one.
1. Your partner
Your partner must be somebody or a company who you trust and believe in. If you are thinking of partnering with a company, research also on the owner as well as the man who is running the business. You will need to deal with these guys if you ever push through with the joint venture. The potential partner should also be able to go with the vision that you have for your company.
2. Their contribution
Another important aspect that you need to look into when starting a joint venture is the contribution that each partner will have for the project. The contributions should be made clear at the start of the project and should be written on paper if need be and signed by each of the partners. That way, everybody is made aware of their roles, thus minimizing the potential to slack off from their duties. It is also good to include in the document that if you ever slack off, any of the partners can be kicked out of the partnership or their shares can be lessened.
3. Exit strategy
There should also be something in writing until when the partnership will run. Remember that joint ventures are temporary but they can be in long term. It is good to have a specific date or period of run and then an option to extend for all parties. This will be a good way to ensure that everybody who is staying in the joint venture is still happy and is not just staying because the clause said so.
4. What the companies offer
Before you go around making an offer for a joint venture, make sure that you have thoroughly researched the company or the person that you want to be partners with. Check what they have to offer and make sure that they are the best in the field or that they can offer the product, technology or service that you need. Remember that you are only seeking the partnership because of that missing element and it is vital that you make sure that the missing element is really there.
When two companies go into a joint venture, they will be combining some of their assets. Make sure that the properties that each of you will be bringing to the table is equitable. It is not only in the number of properties but also the value attached to each one. If the contributions are not the equal among the partners, make sure that you talk about it and put them into writing. The sharing of profits may depend on the contributions of properties. The bigger the contribution, the larger the percentage of your profits.
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.
October 25, 2017
October 25, 2017
August 6, 2017