What is a joint venture

What is a joint venture, and how to set one up?

What is a joint venture?

A joint venture is an agreement between two or more parties, where they agree to share the costs and/or profits of a business. Its name implies an arrangement in which people “jointly” share responsibility for business activities.

Joint Venture doodle

Why run a joint venture?

It can be a smart move because it allows you to share resources and spread out the risk. This is particularly attractive in today’s economy when many people try to save money by sharing resources.

Although you may think that your company would like to run all of its projects alone, there are actually significant benefits in cooperating with other companies.

Although you may think that your company would like to run all of its projects alone, there are actually significant benefits in cooperating with other companies. #jointventure Click To Tweet

The advantages of a joint venture.

Increased Exposure to More Customers.

When you work with another company’s customer list, you have access to their customers as well as yours. In addition, if they have an extensive customer base, it means that the people on those lists are more likely to buy from your business as well! That’s why so many companies run joint ventures with other companies. It’s a great way to grow their customer base exponentially.

Increased Capacity and Resources.

When you team up with another company, you suddenly have access to many resources that you would not have had before. This includes personnel, technology, and financial resources. By pooling your resources together, you can do more with less and get projects done more quickly and efficiently.

Shared Responsibility and Blame.

In a joint venture, both companies are equally responsible for the success or failure of the venture. This can be good or bad, depending on the situation – but it means that there is no one to blame if things go wrong.

Enhanced Skills and Knowledge.

When you work with another company, you have the opportunity to learn from them. You can glean information about their business practices, their marketing strategies, and more. This can help you to improve your own business and make it more successful.

Increased Synergy.

When two or more companies work together towards a common goal, synergy can occur. This is when the total is greater than the sum of its parts – in other words. The joint venture becomes more successful than if each company worked on its own.

When should you NOT do a joint venture?

When looking to certain companies for partnerships, realize that they might not be suitable for your business. These include:

Competition.

A joint venture between two competitive businesses is more likely to cause problems than solve them. The companies will still want to compete during the joint venture, even though they are supposed to be working together. This can lead to tension and conflict, which will ultimately hurt the venture.

Businesses with Different Values.

If the two companies have different values, likely, they will not be able to work together harmoniously. A company with different values will most likely try to change the other company to match its own values, leading to problems and conflicts.

Different Objectives.

Each company should have the same goals in mind with a joint venture, and each should be committed to achieving those goals. If they don’t, there’s no reason for them to team up on any project. For example, suppose one company’s objective is to make as much money as possible, and the other is committed to doing charity work. In that case, they’ll likely want to run their own ventures instead of working together.

Too many chefs in the Kitchen.

Joint ventures are more successful when there are two or more companies involved. If too many people are trying to control one venture, it can lead to chaos and confusion. This can ultimately doom the venture to failure.

When done correctly, a joint venture can be a very beneficial experience for both companies involved. By understanding the advantages and disadvantages of joint ventures, you can ensure that your business is making the most out of this type of partnership.

How to find potential partners for your joint venture?

Now that you know the benefits of a joint venture, the next step is finding a potential partner. Here are a few tips to help you get started:

Do Your Research.

This applies to both your company and the company you are considering partnering with. Make sure that you understand their values, their objectives, and how they operate. This will help you to determine if they are a good fit for your business.

Ask Around.

Talk to your colleagues, friends, and other business owners about potential partners. They might have connections or know of companies that would be a good fit for your venture.

Use a Matchmaking Service.

Many companies specialize in pairing up companies that will benefit from a joint venture. These services can help you to find the best possible fit for your company.

Visit Trade Shows and Conferences.

Attending trade shows and conferences is another good way to meet potential partners and learn more about them before deciding if they would be a good fit for your business.

By following these tips, you can increase your chances of finding a successful partner for your joint venture. Remember to do your research, ask around, and use the resources available to you. With a bit of effort, you should be able to find the perfect partner for your business.

Tips for setting up and managing your own successful joint venture.

Once you have found a potential partner, remember the following things as you enter into your partnership.

Talk About Your Expectations.

When first talking about a new joint venture, businesses often neglect to discuss their expectations. This can lead to problems later on and will not help the company achieve the goals it envisioned for its venture. Before starting the venture, make sure to talk about your expectations, including financial goals and any other objectives.

Clarify Roles and Responsibilities.

Along with talking about your expectations of the joint venture, you also need to discuss the roles that each company will play in this new business relationship. By clarifying who does what within the venture, the success of your new company should increase.

Make Decisions Together.

When starting a joint venture, it’s important to remember that both companies should have equal involvement. If you are not on equal footing with your partner, you might want to find another one or look at other options for teaming up together.

Stay Focused.

Joint ventures can be successful when both businesses focus on their strengths and don’t take over the venture. By working together and not against each other, the success of your joint venture is more likely.

Maintain Good Communication.

By staying in touch with your partner, you can ensure that the venture’s goals are met and that you are both happy with how things are going. By continuing to communicate throughout the life of your business relationship, you can ensure the success of your joint venture.

Buff Up Your Joint Venture Knowledge.

If you want to succeed in a joint venture, you must know what this type of business relationship entails. You can do several things, including reading books about joint ventures, attending seminars on the subject, or even offering to help out with someone else’s venture. By increasing your joint venture knowledge before starting your own, you can ensure that the venture is successful.

6 Examples of successful joint ventures.

There are many successful joint ventures out there that you can model yours after. Here are six examples of businesses that have used this type of business relationship to reach the top.

1.) Microsoft and SAS

In February 2020, SAS teamed up with Microsoft Azure to build a response system for natural calamities, such as hurricanes flooding. The integration of Azure and SAS allowed for exchanging information between flood-prevention tools, such as rain gauges. The analytical capabilities of SAS provided real-time and historical data.

2.) Uber and Volvo

The taxi company UBER teamed up with the heavy vehicle maker Volvo to create a joint venture. The partnership aimed to develop driverless cars, and the ownership ratio was 50-50. According to the association, the firm’s value was $350 million.

3.) NBC Universal and News Corporation

Hulu is an online video streaming website. It is a joint venture between NBC Universal and News Corporation. The company was created in 2007 when the media organizations decided to join forces to create a site that would rival other major internet companies with similar services. It later got acquired by Disney.

4.) BMW and Brilliance Auto Group

BMW and the Chinese automobile manufacturer Brilliance Auto Group established a joint venture in 2003. The partnership, known as BMW Brilliance, was created to manufacture and market BMW automobiles in China.

5.) Sony and Ericsson

In 2001, Sony and Ericsson teamed up to create a joint venture known as Sony Ericsson. The goal of the partnership was to produce mobile phones for consumers. At the time, it was the world’s 3rd largest mobile phone company.

6.) Molson Coors and SABMiller

Molson Coors is a brewing company that produces beer. It has joined forces with SABMiller, another major brewer, to make its 7th largest beer company. The new venture became known as MillerCoors, and it was created in 2007.

Conclusion:

By teaming up together, businesses can achieve a lot more than working on their own. A joint venture is one of the most effective partnership models, and it can help propel your business to greater heights. By studying successful examples and learning from them, you will be able least take some ideas that can apply to your own company. Remember to stay in touch with your partner, communicate well, and be knowledgeable about joint ventures before starting your own. With these tips, you’ll be on your way to setting up a successful venture.

To your success! 🥂