A joint venture is a business arrangement in which two or more parties agree to develop a new business entity or merge an existing entity, usually combining their resources, skills, and knowledge, with the goal of the financial benefit of all parties. Joint ventures are usually limited in duration, often due to difficulty sustaining the relationship, or the parties may otherwise agree that the arrangement no longer makes sense.
Lifespan of Project
Although sometimes thought to be only for a limited, predetermined, or finite amount of time, joint ventures can be set up for all eternity. Famous examples of such ongoing joint ventures include Dow-Corning (in 1945), Sony Ericsson (in 2001), and the Hypro Company (in 1912). Starting a new project can be a significant investment and is often out of reach for many businesses.
A joint venture involves two or more organizations sharing resources to achieve a common goal. By pooling their resources, the joint venturers can work together to achieve the project aims without having to undertake potentially insurmountable or crippling financial obstacles.
While joint venturing sounds exciting, there are also challenges primarily, finding businesses that might be interested in your offered services. Also, if your ideal client is already working with a competitor, they will be less inclined to reach out to another partner for solutions.
Ultimately, joint venturing requires solid relationship building and, you guessed it, consistent communication. When handled well, though, joint ventures can present a multitude of opportunities for business growth.
But, in virtually every other business setting, legal departments work diligently to establish clear rules to delineate the respective roles of each party. The benefit to this type of partnership structure is that the parties each bring specific uses to the table, allowing them to succeed where either party alone might not be. For example, one party may bring cash to the table while the other provides management expertise. Therefore, each party can leverage their skills to help the other party while sharing risks and benefits.
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