The Power of Joint Venture.

As global companies have become increasingly competitive and quick to seek out new opportunities, many smaller businesses have found themselves without the resources or the capital to compete with multinational conglomerates.

While this may be easy for consumers, it has harmed small businesses in their own community. A recent study of over 1,200 small firms conducted by Deloitte revealed that up to 45% of them would not exist if it were not for joint venture partners. Some might argue that the profits generated by joint ventures serve as a "safety net" for struggling businesses who may otherwise fail, but for many small business owners an even more important benefit is the value they receive from strategic partnerships with larger firms.

Joint ventures have always been an important part of business and the evidence shows that they are becoming increasingly necessary as the value of small businesses rises and competition increases. While many have complained about the lack of transparency in joint venture deals, it seems these partnerships are still worth pursuing.

Small businesses need to be aware not only of what a joint venture can do for them, but what they need to make it successful. A healthy relationship between two parties is necessary for a productive deal, and this article will discuss what small businesses should consider before entering into a joint venture deal with a larger company.

First and foremost, small businesses should make sure that the large business is a good match for their business. Not only should they both be in the same industry and have compatible goals, but those goals should also be realistic. For example, it would not be wise for a small tech company to enter into a joint venture deal with a bank because neither of them have much to offer each other. These companies might not even see eye-to-eye on many objectives within the business relationship, which can lead to problems further down the road. It is wise for small business owners to make sure that they are entering into joint ventures that will help advance their own interests as well as the larger firm's interests.

Once the two parties have determined that the joint venture would be beneficial, they should then focus on the details. In a typical deal, a larger company may provide capital to the smaller business in order to help it grow. The larger company should also agree to share any profits that come from this investment with their small partner and not expect additional compensation for managing the joint venture.

The next important detail is the division of work between each partner. While this may seem simple for some, it can often be complicated for smaller businesses because they might not have experience in managing these types of deals or resources with which to do so. When this happens, both parties should meet regularly and discuss how work will be divided. A little research goes a long way in determining how the work can be divided effectively and should be done before the deal is finalized.

In order to ensure that the partnership will help both parties grow, it's important for small businesses to make sure that their joint venture partners remain committed. One of the best ways to do this is through adequate communication. It's important for small businesses to remember that they might know more about their industry, but the larger partner knows more about business in general. The larger company can provide valuable insight into running a successful business, which will benefit both parties when they work together.

Conclusion:

Joint ventures can be an excellent way for small businesses to grow and prosper while maintaining their independence. However, they do not necessarily come without a cost, so it is important for small business owners to take their time in finding the right partner to work with. By doing this, small businesses can avoid pitfalls and increase their chances of success in the long run.

Dr Richard Taffler founded Taffler Associates in 1994 after having worked as a senior director at the Royal Bank of Scotland for nine years together with his brother David Taffler MBE who is now Chairman of Taffler Associates.