As there are numerous good reasons both business wise and financial, to create a joint venture with a company that has a great complementary capabilities and resources, such as distribution channels, new technologies or finance, joint ventures are becoming an increasingly popular way for different companies to build strategic alliances.
In a Joint venture, two or more parent companies agrees to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared managerial power.
But before going into a joint venture, you should consider something first. We have gathered some information on what are the most important things to think about before going into a joint venture, here is the list.
Before going into a joint venture, be sure to first screen prospective partners. Make sure that you are on the same level of the industry.
Also make a joint development of a detailed business plan and short listing a set of prospective partners based on their contribution to the development of the plans.
Check the credentials of the other party by doing interviews and research. Check their previous business and also the sales that they are getting. You may also want to check customer feedback regarding their services.
You should also develop an exit strategy and terms of dissolution of the joint venture in case things would go wrong.
You should also try to think of the most appropriate structure for you joint ventures, for example most joint ventures involving fast growing companies are structured as strategic corporate partnership.
You should also take notice of the availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can weaken the economics of the deal for themselves and their parties
You should also point out the different special allocations of income, gain, loss or deduction to be made among the partners and so with the compensation to the members that provide services.
You should also take note of the role of your business architect, this is a person that initiates new business ventures or leads business innovations, designs a winning business model and builds sustainable balanced business system for a lasting success.
Business architects can be found in multitude of business settings, be it in corporate change leaders, initiator of joint venture aka joint venture strategist, and managers of different and radical company settings.
The business strategy should begin with a sound, well articulated strategy. Before going into the first step, determine first and explain why you wish to enter into a joint venture, why you have chosen such partner or partners, and what the goal of the company is. You should put into word the involvement of the parent companies and define how long will the joint ventures last.
You should also describe strategies to define the managerial, accountability, decision-making process and conflict resolution procedures.
Joint Venture is one of the best strategy for business growth available. A well planned and well executed JV will definitely improve the bottom line of any companies involve. And to ensure the JV is well planned and well executed, It is advisable that companies engage with a skilled business architect that specialize in Joint Venture strategy.
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