Joint ventures generally are business partnerships established between two or more parties (individuals, business groups, companies, corporations) for the purposes of expanding the business and achieving merits by joining forces and working as a team.
One advantage in these business arrangements is that competencies and results are shared. Yet, even with joint ventures, achieving success continually still requires a lot of planning.
There are several types of joint ventures. Big companies may join forces to become even more powerful and thus dominate the market. On the other hand, small companies may team up to build a stronger presence in their market niche to fend off bigger, resource-rich companies.
Joint ventures can also be used to gain access into foreign markets. Foreign companies often form joint ventures with indigenous companies that are already present on the market, but lack capital or financing to truly take advantage of the market potential. Foreign companies can bring money, new technologies and competitive strategies, while benefiting from the relationships and the brand of the domestic company.
If you have been thinking about coming into a joint venture lately, here are 4 tips to set you up for your success:
1. Choose your partners carefully
Many young entrepreneurs mess this one up… many times. People makeup almost 90 percent of the business success efforts. Failing to bring in or join the right partners, positions your venture for an untimely death.
A joint venture has greater chance of being successful if partners have an excellent reputation. An essential component to good team building is having the right partners. They must be trustworthy and have a high level of integrity.
Joint ventures involve extensive team building effort because it is a relationship between two parties and if the relationship is to last, it must be nurtured. Both parties must be able to trust each other and deliver on each other’s promises.
Consider issues such as vision alignment. What skills sets are you bringing together before jumping into these ventures? Nothing can be as damning to a business as partners with conflicting interests that will show up later in the life of an entity.
2. Know what to expect from the beginning of any joint venture relationship
Know from the start what your goals are, what you want to accomplish, and see if your goals are attuned. Get your priorities right from the word go.
Coming into a venture relationship requires that partners have a clear memorandum of understanding. This will curb the instances of feeling betrayed as the business goes on.
Plan your strategy ahead of time and make sure you cover all the legal aspects stipulated in your joint venture contract, like resource availability and management, special allocations, mutual gains, deductions and income issues.
Stick to the business development plan and establish new priorities and goals as you progress. By efficiently managing resources and by maintaining a good, competitive business policy, you will secure the longevity and the success of your business.
3. Be honest and open with all business transactions always
Once you have negotiated the details of the joint venture, the actual work begins. To keep things going, a lot of trust, understanding and expertise are needed for ongoing team building on both sides.
Maintain an open dialogue and always address issues upfront before it becomes a bigger problem that threatens to break up the partnership. You should show that you can be trusted.
If you want to form a partnership with a certain company, make sure that its business practices are in-line with yours. It would be very difficult for you to form a reliable team with people who lack motivation or professionalism, so you should look for well-trained, open-minded potential partners.
4. Avoid shooting too high with your offers
If you are a smaller business, do not target your offer to a large company first as it will most likely be thrown away. Instead of aiming too high at this point, establish successful joint ventures with small companies to get noticed by the bigger, powerful ones.
Remember, the other party doesn’t necessarily expect the impossible. In fact, if they have a working knowledge of the business world, if you shoot too high in your offers they’re likely going to conclude that you’re not fit for business.
It can also be very tempting to promise too much but that is a temptation that is to be avoided instantly. Sometimes aspiring entrepreneurs are tempted to promise guaranteed and almost instant successes in their joint ventures. This is a mine field.
Establish a reputation as a solid business owner who knows how to turn joint ventures into gold for their partners. Businesses naturally gravitate towards successful businesses.
These are the basic rules for joint ventures and it is ultimately up to you to see whether a deal will be successful. Learn with each joint venture deal to improve on the next deal. Deals can only be made if you go after them. With lots of hard work, you’ll develop enough expertise to be a joint venture expert and take your business to the next level.