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How To Choose The Right Partner For A Joint Venture
As a business owner, you will want your business to grow and trump your competitors. But most of the time, you can only wish for things like this. The real challenge is how you intend to actualize all these dreams.
In the business world, there are various methods a business owner can use to expand his business further. And one of them is a joint venture.
So, What Exactly is a Joint Venture?
Simply put, a joint venture is a business model that entails selecting a business partner to propel your business venture even further. As a business owner, a Joint venture is probably the best way to go if you are not that financially buoyant. Joint ventures have many perks: for a start, they can help expose your brand to a much larger audience. Also, it can make your business grow even bigger. You can also save time and money when you partner with an existing supplier, customer, investor, or someone you have met socially.
Now that you know what a joint venture is and its importance, you may be wondering how you can choose the best partner for a joint venture. This and more are what we are going to discuss in this article. So, read on to find out how.
How to Choose the Right Partner for a Joint Venture
As a business owner who wants to venture into a joint venture, selecting the right partner can sometimes be very daunting. This is because the partner that you pick will either make the venture a very successful one or a less successful one. In short, your choice of partner will either make or break your business. Hence, before selecting a partner, you must perform rigorous research on the prospective partners before selecting one.
Before we talk about what to look for in a partner before you select one, it only makes sense that you know where and how you can find a partner.
For a start, if you are seeking to partner with another company, you can visit the company website to check if they are actively seeking a partnership. Some companies often partner with businesses that do something slightly related to what they do—for example, a pen producer partnering with a notebook producer.
In addition, you can get familiar with business news because you can get loads of information about people or business owners who are actively looking for partnerships from the news.
Also, if you are active on social media, you can look at some companies that follow you or have you on their friend list. Some of these companies may be genuinely interested in what you do or produce and may be open to forming a partnership with you.
Lastly, before selecting a partner for a joint venture, you should try to look for non-competing companies. One of the importance of considering a non-competing Company is that both of you will benefit greatly from the exchange of leads or some form of shared marketing and distribution arrangements: Something that is hardly possible in a competing company.
However, while all these surely sound great, you should not get carried away by what you hope to gain. Instead, you should focus on how to draft a detailed joint venture agreement that will clearly show your and your partner's responsibility. The agreement must also show what you own and what your partner owns.
Now back to what you need to look for in a prospective partner before considering one. As we previously said, in selecting potential partners for your business, you should carry out some basic due diligence checks. This ranges from analyzing their financial status, the company's and the owner's legal status, the kind of management team they have, etc.
When choosing the right partner for a joint venture, you must check out a few things.
- You need to check If they are financially secure. The goal of a joint venture is to form an agreement with a high-profile partner with resources available to him. Therefore, you need to check if the prospective partners have money to put into the business.
2. You also need to check if they have credit problems. One way to get this is by going to the company's official website and downloading their financial details (some companies often make their financial details public). After downloading the files, you can analyze them to check if they have credit problems. And for companies who rarely make their financial information public, you can request one from the company's registrar.
3. They should clearly indicate the assets they will be putting into the joint venture. This is usually included in the agreement document. This is where the partner will state the assets they are bringing into the venture.
4. You must also check if they already have joint venture partnerships with other businesses. And if they do, you need to check how their pre-existing agreement with another business will affect yours.
5. You also need to question how realistic the partnership is. The sad truth is not every partnership will yield positive results. Hence, you and your partner need to set a realistic target.
6. You need to know their performance level. That is, how they perform in production, marketing, and workforce.
7. Lastly, reviews from customers and suppliers say quite a lot about a company. Therefore, you need to find out what the customers and suppliers think about the company before entering into any partnership with them.
As a business owner, you must strive to protect your interests before signing up for any joint venture. So to ensure that your business interest and property rights are well protected, we will advise you to contact/work alongside a qualified solicitor to draft the legal document.