There are various signs of success in business. One of them is when you need to expand your office to accommodate the increase in employees. Another is when you are contacted by another company who likes what you do and wants to enter into a deal. The classic case of two businesses working together is when a distributor contacts a product company in the hopes to stock their product and sell it in their retail stores. But what are the practical challenges to this kind of joint venture? Here is an insight into the practical side of entering into a partnership.
First of all you will need to have serious meetings in which you negotiate a price for your partnership. However the logistical side is where the real uphill struggles can come in. Things like manufacturing a certain agreed amount, storing and packaging the products safely, and assuming any costs for damages or late arrivals are just a few.
Quantity demand and raw materials
In many joint ventures that require you to increase your production rate, there is the added challenge of acquiring more and more raw materials. For example you make a product that uses a lot of steel. As a common practice for a business of your size and funds, you are making just enough to not stretch yourself too thin. Now that a distributor wants to stock the shelves of three or more of their stores, you need to suddenly buy more steel.
How do you do this immediately and not run into debt? Bulk buying materials is the solution that many small businesses turn to. Yes you will be getting a large discount but you also need to calculate how much of the material will be made to good use. You don’t want material to not be used and end up being wasted. This would negate the bulk buy discount you get from industrial materials manufacturers.
Being treated fairly
Small businesses often have to fight their corner extra hard as compared to larger businesses. Because of your size, some joint ventures don’t yield in your favor or even a split 50/50. To make sure you are being treated fairly hiring business solicitors is a great idea. They know business laws like the back of their hand. They can oversee or even have a direct hand in writing your demands as part of the contractual agreement.
Remember that joint venture contracts are a combination of agreed terms so each party involved need to create their half of the contract. In the wording, you need to make it clear what share of the profits you will want, what kind of fallback position you will have if those profit margins are not met. This will avoid your venture causing you to go into debt, and dragging you down.
Joint venture partnerships are usually very successful if both parties come to the table with good intentions. Make sure you’re ready to increase your production rate and bulk buy to save as much money as you can. Being prepared for the practical side of entering into a partnership, creating a solid contract with the help of business solicitors will assure your business of never being dragged down when things don’t work out.