What To Consider When Starting A Joint Venture
Taken loosely, the term “joint venture” can mean a helluva of things. It is even use as a synonym for partnership especially for first-time entrepreneurs who are seeking financial or industrial partners. To those who are not familiar with the business lingo, the financial partner is one who provides the money for the company while the industrial partner is one who provides the expertise for the company.
Although the term can also be used for this, in the real sense though, a joint venture is more than just a partnership. It refers to the partnership of two or more entities who seek alliance in order to make a new product or start a project. It differs from the ordinary kind of partnership in the sense that it can also be short-term, only for the duration of the project or the product undertaken.
You see, a joint venture can be undertaken temporarily until a project is finished. Most of the time, this is done by companies, even well-established ones, because they lack the resources that they need to make a project or a product a success. The partners that are sought will be able to find additional financial backing, a service or expertise.
One example is when two companies form an alliance because one can provide the money while the other can provide the expertise. Another is when a partner has the access to the market or to the resources that another company needs in order for its plans to push through. The same goes with companies who need the additional backing of a local company in order to establish their operations in the country.
There are many reasons why a company or a person for that matter will seek a joint venture. It is one of the most viable ways to make a business a success. But this does not mean that the joint venture will be a success. Often, the failure of a joint venture is not because of the idea of a partnership but how the partnership is undertaken. What makes a joint venture fail is discord between or among the partners, incompatible partnership and betrayal in the partnership.
The secret to making it a success is in choosing the right partner as well as doing the right paperwork for the business. Every detail should be discussed if you want everything to become smooth-sailing. When you have everything in paper form, it is harder for any of the partners to slack off or to turn against their word. They may renege from their commitment but with a document that binds them to the work, they can be held liable for it.
Otherwise, the joint venture can only lead to discord and problems. Many joint ventures have dissolved even before it can launch the product or enterprise that they partnered for in the first place. In fact, although many have tried to start a venture, only a few manage to survive and become a big conglomerate. Some fizzle out while others merge together.
Joint Ventures And What You Should Know About It