Joint Ventures

As a small business owner, growing or strengthening your business is an important aspect of running a successful business. There are many ways to grow your business and not all forms of growth suit every business. Because of this, it is important to figure out what type of growth you want and how best to achieve it. Seeking professional advice, before embarking on a joint venture, partnership or limited liability partnership or merger, is an important first step to successfully grow a business.

Successful joint ventures

A joint venture is one way to grow or strengthen a business. A joint venture can be a long-term choice or one taken on a project-by-project basis. It normally means that two business come together to collaborate. A joint venture is a good way for a business to grow almost ‘instantly’, with minimal capital requirements, as both businesses bring their own staff, know-how and resources to the venture.

Joint ventures can work well for businesses that are in the same line of business. A joint venture would allow the two businesses to increase their market share or customer base almost instantly. Joint ventures are also a popular tool for a business to enter a new geographical market. For example, a UK clothing retailer, wanting to enter the Japanese clothing market. By finding a complementary local partner, the UK retailer could enter the Japanese market, with little own investment or know-how, creating a successful joint venture.

However, joint ventures also have their risks. Finding the right joint venture partner is the first step. It is important to vet potential joint venture partners. Do some research and learn about the company’s history, financial standing, structure, credit etc. Another important step is to clearly define what the joint venture will cover. Both parties need to clearly understand the scope of the joint venture and what the venture will cover, to avoid any misunderstandings. Therefore, drawing up a detailed business plan and joint venture agreement is important for a joint venture to succeed.

Mergers and acquisitions

Another way to grow a small business is through mergers and acquisitions or M&A. A successful M&A can add human skills, technological skills, capital, market access and/or customers to a business. Just like with a joint-venture, it is important to do leg work early on. Research your M&A target thoroughly, look at credit history, financial standing, ownership structure etc. Legal and financial advice is a must here.

Business partnerships

If your business is a partnership or limited liability partnership (LLP), then it is also possible to grow your business, by bringing in a new partner. A new partner could bring new capital, new business expertise and/or new customers to a business. However, a new partner will also share in the company’s profits, possibly reducing the existing partners’ profits. Depending on your company’s partnership agreement and the type of partnership you have, you may need to report or comply with regulations from the Companies House (www.companieshouse.gov.uk), if you add a new partner. 

If you would like to discuss your business opportunities with a Business and Advisory expert, then please contact us here.