What Are Joint Ventures

By Matt Bacak

Joint ventures are an alliance between businesses. A friend of mine normally tells me that it works on this saying:

If you can’t beat them, join them. Two heads are better than one. United we stand.

Below are some joint venture tips.

1. Joint ventures are strategic alliances where at least two businesses come together to share a market, assets, knowledge, intellectual property and profits.

2. They differ from mergers because no ownership is transferred in the deal.

3. It mainly occurs between market giants. It can also happen between small businesses to fight a common competitor, who is normally bigger.

4. It works best if the venture is between two businesses that compliment each other in the market.

5. Firms with similar products can also come together in order to penetrate the market further. This is ideal if both companies do not want to heavily invest their resources for the same goal.

6. It is not surprising to see a big firm joining smaller firms. This can be done to acquire technology, intellectual property, or other resources that would be hard or expensive to acquire.

How do joint ventures work?

The process of forming partnership is well known to everyone. However, the main aspect of joint venture lies in the execution of the business.

7. Everyone might know what needs to be done, join forces, but it is very easy to overlook the “whats” and “hows” of the business due to excitement.

8. The execution of these partnerships follow strict plans to ensure that you do not lose out on the success.

9. As much as you can find legal agreement templates on the internet, I highly recommend that you seek appropriate legal advice before you enter such a business relationship.

Should you start a joint venture?

I cannot give a direct answer to this, it involves considering various factors and knowing what the business relationship will address. The following questions might be of help:

10. What should you sell and how can you reach my target market?

11. Do you know your competitors and their strengths?

12. What do they have that you don’t?

13. Which geographical regions won’t you be able to reach with the ventures or high costs?

14. What can you offer your competitors to make them accept the joint venture? You should make them an offer they can’t refuse.

15. Can you access the correct legal resources that will structure and ensure that all parts of the business are well covered?

16. Which legal provisions will you breach in your new merger?

17. Do you know of any successful joint ventures that can share with you their experience?

18. Do you know that most of the mergers might result to a reduction of your workforce?

19. If some of your employees will be laid off due to the process, are you ready to let go?

20. What strengths and weaknesses do you have?

21. Which threats and opportunities do you face in your market?

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