One of the key challenges faced by various Indigenous and non-Indigenous businesses include business survival, expansion, development of new products or trying to move into new markets, particularly overseas. A joint venture arrangement is often offered as an option, but what does it mean to a Small and Medium Enterprise (SME) owner?
A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.
Your business may have strong potential for growth and you may have innovative ideas and products. However, a joint venture could give you:
- more resources,
- greater capacity,
- increased technical expertise, and
- access to established markets and distribution channels.
Entering into a joint venture is a major decision and if not done correctly could be a financial disaster. Key considerations to be aware of include (but not limited to):
- Business relationship - It is important there is a strong working relationship between all partners with clearly outlined roles and responsibilities.
- Corporate structure - There are limits as to what type of entity a company can form, depending on the participants’ own ownership structures.
- Governance - Each member’s ownership share must be specifically laid out in the agreement. In addition, the degree of control each partner exercises over the JV’s operations.
- Capital issues - Beyond the initial capital contributions, the operating agreement should establish the process for ongoing cash contributions, which often are necessary on jobs of longer duration.
Tagai Management Consultants have the capability to facilitate businesses exploring entering a Joint Venture and/or partnering arrangement. On the other end of the Joint Venture cycle, Tagai Management Consultants can also work together with existing joint ventures that may require assistance to be guided back on track.