Forming a Company
Written by Kristin Marquet for Gaebler Ventures
Ask the right questions to prevent bad decision-making and learn how forming a joint venture can be advantageous to your business.
As the economic climate becomes more volatile, more businesses pop up and markets become saturated. Competition is becoming increasingly intense and projects get larger and more elaborate.
Businesses need get creative and find new ways to cut costs and become more resourceful and efficient. The best possible way to gain leverage over your competitors is to join them by forming a joint venture.
A joint venture is known as a strategic alliance and involves two or more parties. Joint venture partnerships are usually formed so that two ore more entities can attain a certain goal or objective such as a entering new market, increase existing market share, obtain intellectual property rights, share expertise, and increase profits. Joint ventures differ from acquisitions or mergers in the sense that there is no transfer of property ownership or assets between entities or businesses.
It does not matter whether your company consists of only you or your company has fifteen employees, more and more businesses are collaborating to gain market share and ward off larger competitors. With that said, many home-based businesses have entered into joint venture agreements with complementary businesses to share resources, cut costs, and expand web and market presence.
To determine whether a joint venture is appropriate for your business, you need answers to the following questions:
- What am I selling?
- What is the best way to reach my niche markets? Do I have access to certain markets on my own?
- How can I add value to this joint venture?
- What are my goals and objectives? Credibility? Expertise? Intellectual property?
- Who are my direct competitors? What resources do they have that I don't have?
- Who is the best business partner that could help me reach my goals?
- What companies have resources that are complementary to mine?
- Do I want to combine resources? Am I really all right with sharing?
- Who can I contact that has been through a comparable process?
- Do I understand the legalities of a joint venture agreement?
- Am I willing to lay off employees in the event that we reduce the workforce?
- What are my strengths, weaknesses, threats and opportunities?
- What are the potential liabilities that come with joint ventures?
- What are the chances of success?
- What are the legal implications if the joint venture fails?
After you have taken a considerable amount of time to evaluate your answers to the questions above, then it is time to approach companies you believe that can help you reach your business goals. Remember though, approximately more than half of all joint ventures fail after the first five years. Thus, it is imperative that you consider and plan for every possible scenario that may surface.
Kristin Marquet will be receiving her MBA from Harvard University in Fall of 2010. She has worked in the marketing and public relations field for over 10 years.
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