A joint venture is when 2 or more businesses combine resources, knowledge and skills to achieve a goal. Joint ventures share the associated risks and rewards of a project between businesses.
Advantages of a joint venture
- Your business can develop quicker, reach a wider market and earn more money.
- You can grow without borrowing money or seeking outside investment.
- You can access new markets and distribution networks.
- You gain access to additional resources, such as technology and specialist staff.
- This structure offers protection by sharing risks with your venture partners.
- Only a temporary commitment is required, as joint ventures often only last for a particular project or goal.
Disadvantages of a joint venture
- It can take time to build a strong and trusting relationship between you and your business partners, taking into account different work cultures and management styles.
- Time must be spent clearly communicating the goals of the venture to avoid problems with business partners.
- There is the risk of conflicting objectives between the business partners.
- Partners may commit uneven levels of investment, assets or expertise to the project.
- Equal leadership, direction and support may not be provided by the partners at the beginning of the venture.
Joint ventures can vary depending on your business goals and the level of commitment you want to give to a project.
Before entering into a joint venture agreement, you should seek professional advice to minimize risk. It’s important to negotiate the right levels of profit and tax sharing, and the management and liability of a project with your business partners.