Joint Ventures and How They Can Help Your Business

If you are a small business owner, then you have probably had to pass up a fantastic opportunity or two because you lacked a particular skill, or simply the capacity to undertake the project.

The good news is that there is an alternative – entering into a joint venture with another company. Let us look at how that can help your business.

There are several reasons a business will enter into a joint venture with another company – they may need more staff or capacity, they may require a specific technology or they may require specific expertise. In most cases, the cost of gaining what they need themselves would be too high, or their company simply could not acquire what they need quickly enough in order to take advantage of an opportunity fast enough, so small and medium enterprises choose to ‘team up’ with another company instead.

Joint ventures are usually subject to legally binding contracts, which outline responsibilities, liabilities and profit sharing. They may apply to a single project, or they may create a separate business entity that operates over a longer term, on a specific type of project.

In many instances, joint ventures are set up specifically to take advantage of a new market, or a large project.

For instance, in the construction industry, joint ventures may be entered into between a company that specialises in earth moving and demolition, and one that has expertise in construction. Neither has the skill or capacity to undertake the tasks that the other does, and they both benefit by working together, being able to undertake bigger projects, or to win government or large corporate contracts.

Joint ventures exist in almost every industry though. Whether it’s computers, the medical field or the restaurant industry, there’s always an opportunity to team up with a company from your field that has a slightly different expertise, or even one from a completely different industry, with whom you can gain new business.

When it comes to benefits to the business owner, there are several that you should consider. First, you will gain access to the employees of your joint venture partner, all of whom have skills and talents, as well as experience, in a field where your employees probably do not.

Your joint venture partner may also have equipment and machinery that you do not, and that would cost a large amount of money to purchase. They may have credentials or connections in industries that you do not, or they may have access to a market segment that you do not.

All of these allow the business owner to access new markets, without the cost, time, and effort that may have been required to do so on their own.

In essence, a joint venture is a symbiotic relationship between two businesses. Each put in time, money and effort, and each gain experience, prestige and profits. Even very large companies enter into joint ventures from time to time, and very often, those joint ventures are long term, and become stand-alone companies over time.

Entering into a joint venture also allows your company to continue to operate within its normal business environment on all projects that fall outside of the scope of the joint venture, and each company retains their own employees. It’s only when their interests overlap that the two (or sometimes more) partners in a joint venture pool their resources, in order to benefit mutually from a particular project or business are.

Of course, while there are many benefits to teaming up with companies in a joint venture, there are also risks that you would need to be aware of. The first thing you would need to do would be to do a thorough investigation into the company you are considering collaborating with. Remember that your partnership will be public knowledge, and if you choose to partner with a company with a dubious track record, you run the risk of your own business losing face.

The next thing you will need to ensure is that the company you enter into a joint venture with has the necessary capacity to undertake their part of the project or business area you are targeting.

You will also have to ensure that your joint venture partner is sure of their role in your partnership, and what they will get out of their part in the venture, and that everyone agrees to terms that are fair for everyone.

Once your joint venture is set up, you will need to devote staff from both companies to managing and completing the project or projects you are undertaking, and you will need to make sure that your counterpart is delivering on their responsibilities, and that you do too.

Managing a joint venture can be tricky, but the benefits of teaming up with the right company far outweigh the risks, and it can be the perfect opportunity to grow your business, access new markets, and add new feathers to your business cap.