Joint ventures can bring huge benefits to both prospective business owners and well-versed entrepreneurs, setting them apart from other types of business ownership and allowing companies to thrive and grow.

But they also come with risks – their objectives often clash and goals become ambiguous. It is important to consider just how you plan to make a joint venture work.

Paul Mizen, managing director of the Recruit Venture Group, gives his insight into the things to consider when entering into a joint venture.

Do you have existing industry/market knowledge?

Joint ventures are a great way to pool resources and gain market knowledge from informed and beneficial partners. Perhaps you are seeking a new industry or new market entirely and don’t possess the knowledge of these market spaces and target audiences. This is where a joint venture partner can fill in these knowledge gaps and offer unique insight into a market or industry that complements your own particular skills.

For example, Jaguar was able to enter the Chinese market through entering into a joint venture with industry giant Chery automobiles. The companies combined their expertise to deliver innovative and sustainable automobile solutions to new markets.

SWOT your businesses

“If the strengths of one business compliment the weaknesses in another business, this can present the perfect opportunity to enter into a joint venture”

Assessing the compatibility of both joint venture partners is crucial for success and shouldn’t be overlooked. In order for business to thrive, both businesses should be compatible and complement each other’s strengths and weaknesses.

This can be achieved through conducting a simple SWOT analysis to identify the strengths, weaknesses, opportunities and threats of each joint venture partner. If the strengths of one business compliment the weaknesses in another business, this can present the perfect opportunity to enter into a joint venture.

However, if the analysis demonstrates a clash in strengths or opportunities, this might not be the best route to take or the venture partner may not be suitable.

Don’t be greedy

Many people shy away from joint ventures as they are hesitant to split profits and earnings and share stakes in the business. However, 50 per cent of a business which is turning over £2 million, making a profit and has the ability to grow is far better than owning 100 per cent of a business which can’t get off the ground!

It is going to make you far more money in the long run and will give you something you can scale up and be proud to own, despite owning it with others. Yes, you are giving up a stake in your business but you’re not giving up your control.

Avoiding delusions of grandeur is key for any start-up and that’s no different if you are starting up as a joint venture, like most business models, being a joint venture requires a pragmatic approach.

Become a relationship management guru

A strong and durable business relationship is fundamental for success in joint ventures and can make or break a business.

It is therefore crucial to plan how the relationship will work as well as regularly assessing the joint venture progress and compatibility throughout.

This involves recognising what each partner contributes as well as ensuring that both businesses understand the joint venture agreement and know what both parties aim to achieve. This can be aided by ensuring that both partners have matching goals that are clearly set out and measurable.

The relationship can be consistently managed by maintaining open communication and by having regular meetings.

Stick to what you do best

All the best performing joint venture partners I work with have one thing in common: they get on with what they are best at and focus on what they do best.

That is the best way to grow any business as a joint venture. Just stick to what you know best and you will see your business grow quicker and stronger than what you would if you started up on your own.

However, that growth won’t happen overnight – you have to work for it. With the right attitude there has never been a better time to make your move. You will be safer, stronger and better off as a joint venture.

Adam Baylis, technical director of radiator company Castrads, talks about how they teamed up with smart valve manufacturer, Genius Hub, to strengthen their product.

We identified a gap in the market and acted on this. Knowing our environmentally-conscious customers, who also value beautiful things in their home, we wanted to offer a radiator valve which was both smart and attractive.

We knew we wanted to work with a smart valve manufacturer, so we carried out research into the market, the key players and the kind of products currently on offer. During our search, Genius Hub’s products frequently appeared top of ‘best smart valve’ articles and they stood out as a well-suited potential partner.

So, I went to meet Alasdair from Genius Hub in person and quickly discovered the team were a great match for our new project. Their engineers have a closeness to the end user that you don’t get in many bigger corporations.

Adjusting to the change

As with any partnership, it can take a bit of time to get to know each other and really understand the ins and outs of how the business runs and the values your partner company is built upon. However, this is incredibly important when working on a joint venture, so it really is time well spent in the long run.

Cross marketing was an interesting challenge because both companies have their own brand and voice. Picking a partner from the start who reflects your core values makes this easier as you can naturally and authentically market your joint offer to new and existing customers.

While it is important to collaborate on marketing materials and messaging, it was also important for both brands to keep their own unique voice, like with any marriage.

The best bits

You get to work on an idea and build something that neither of you could have done by working alone. You always learn new things by looking outside your company and skillsets.

Your collaborations tell your customers something about the status of your own business too. That’s why we picked a manufacturer that had been rated highly to deliver a superior product which our customers would expect.

In the end it turned out to be a win-win for all involved. Genius Hub can now offer customers its smart valves in a variety of colours to complement every décor. For Castrads, the joint venture has expanded our product offering, giving our customers the option to purchase smart home technology alongside their radiators.

Finally, homeowners can benefit from the latest in smart heating controls without spoiling their carefully planned interiors. Before our partnership, all the other smart valves on the market are white garish plastic.