PROFITABLE COLLABORATION
COMPETITORS DO NOT have to be your business foes. A joint venture with a similar business can lead to profitable collaboration on short-term projects or strengthened long-term relationships. Growth can be enabled without having to borrow money or look for new investors. Joint ventures also work well with markedly different enterprises and are particularly popular with companies operating across national frontiers.
Among co-operative trading to hit the headlines have been the high visibility deals between Telefonica and Vodafone, BMW and Toyota, Google and NASA. The majority of UK government departments and local authorities have co-operative deals with service providers.
By and large, joint ventures are productive all around, for small businesses as well as corporations. Benefits can stack up: providing access to new markets, using bigger distribution networks, increasing production capacity, taking advantage of greater resources and sharing costs and risks.
For example, you might decide to use your joint venture partner's customer database to market your product, or offer your partner's services to your existing customers. Joint venturers may be boosted by being able to pool marketing, purchasing, logistics, training, research or development.
FLEXIBILITY
Usually, there is flexibility. The joint venture can be structured to be short lived or about only part of what you do, thereby limiting commitments and exposure for both parties.
Once an opportunity has been identified and all concerned are happy with one another, take legal and financial advice from professionals who understand the pitfalls as well as benefits.
The way you set up your scheme affects the way in which you run it and how any profits are shared and taxed. It also affects your liability if anything goes wrong.
Pitfalls? Partnering with another business, whether formally or in a looser manner, is bound to be complicated. It takes time, effort and skills to build a relationship. Inevitably, there will be problems along the way.
As a precursor, you might want to examine the state of your own business – a structure and activities audit – being realistic about strengths and weaknesses. This could help you to quantify how you will be a favourable fit with your prospective partner(s).
MAJOR DECISION
Entering into a joint venture is a major decision. To avoid danger or disappointment, agree the objectives of the undertaking well in advance and communicate those intentions to everyone involved. Avoid or recognise and accept any imbalances in expertise or investment brought to the arrangement. Be prepared to provide extra support in the early stages so that there are solid foundations.
Importantly, make sure that your marketing and PR specialists are kept up to speed, enabled and encouraged. They could be pivotal in helping you to map out and steer the best course.
Sooner or later, most partnering arrangements come to a close. Ending a joint venture is always easier if you have addressed those key issues in advance.
Along the way, you should have enjoyed the benefits of extra capacity and expertise, extended your marketing vista, explored new opportunities, achieved increased customer exposure, spread risks, and shared in the profits. It won’t matter who scores, as long as the team wins.
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