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The Benefits of a Joint Venture

The thoughts of Richard Osborne on many subjects over the years.

The Benefits of a Joint Venture

When I first started up in business my first business was in a 50/50 partnership, but we didn’t really agree what each of our objectives were or what each others roles were going to be in the business. Needless to say, after a couple of years the business relationship broke down. Just like 50% of all business partnerships, hence my previous blog about the importance of have a Shareholder Agreement.

Since then I have always taken the view that I wanted to own 100% of my business interests, never having any more shareholders. I wanted to be in control of my own destiny and my own business. I then started another business with a minority shareholder, and I put a shareholder agreement in place to ensure we both performed as expected. I had a hunch that my partner wouldn’t perform, and as expected he didn’t so he has lost his shares in the business. So for a while I lost faith in working with a business partner again, but then I thought some more (and read Richard Branson’s autobiogrphy) and came to the following conclusion.

I currently run three businesses full time, but I find myself continuously coming up with other ideas for new business ventures. If I tried to run these other new businesses myself I would not be able to, there is only so much that I person can do themselves, so yet again I needed to look at working in partnership with other people to enable these business ventures to see the light of day. This is where I can talk though the thought process I had for one business in particular.

I have had many people ask me whether I was able to supply them with lists of new businesses that have just started, people who wanted to get to these new companies at the ground level to offer them anything from mobile phones to accountancy. Technically one of my businesses has access to that data through our links with Companies House, but I felt it unethical to use that business to offer this service. So I always turned this business opportunities down, until lots of people started asking me for this information. So I started investigating this business model, and whether it would be a profitable business or not. I also checked out some of the competition to see what I would be up against.

Once I started putting the feelers out amoungst my contacts it wasn’t long before I had over £300,000 worth of pre-orders penciled in for a business that wasn’t even started yet, so I needed to find a way to get this business up and running pretty quick. I spoke to some software developers and designed an automated business model, a business that could effectively run itself through automated technology and came up with the entire business model. I then sifted through my contacts to see who I felt would be the best organisation to work with, and picked up the phone to arrange a few meetings. I found an organisation who had similar links to company data that I have, know the data industry very well, and have their own contacts similar to mine. More importantly too, a company where we both know and respect the strengths of each other so that we can work together. It also helped that I brough over £1/4 million on orders to the table ready to go.

Some may argue that perhaps I’m handing another company shares in a business that I needn’t have, I have the money and orders to start this business from a running start but do I really have the time? I’m in a situation now that I consult to this new business venture, I sell the business services to my own network of contacts, and I take my share of the profits. My new business partners have an exciting business opportunity to get involved in, they run the business day-to-day and they get paid for doing that. They also want the business to work, and sell it themselves to their own contacts. They also get their share of the profits too, and speaking to their directors and Chairman they are very excited about working on this business ventre and learning from my expertise in technology and the Internet.

I have two more Joint Ventures I am working on at the moment with other businesses, and I am pleased to have found a vehicle that enables business ideas that I had previously shelved to be realised. Further more, my new business partners are all chosen by me as being firms that have the expertise that my ventures will need, but can also learn a lot from my strengths. Oh yes, and not forgetting the partnership/shareholder agreements too!

So if you are considering working in a JV arrangement, you need to choose your business partner carefully. Both partners need to gain something from the other, it cannot just be a one way street, and these gains can be anything. For example, one of the things I am gaining is freedom of my time so that I do not need to run these businesses myself. That to me has a monetary value just the same as human resources and financial investment. Consider your own strengths honestly as well as your weaknesses, and do the same for the people you are consideirng working whether. There is not point both parties being good at the same things, you will need to balance each other out and then respect the expertise of each other. There is no way my partners in this venture could tell me what is and is not a good website, yet there is also no way I could tell them anything about the industry of business information and company data.

Joint ventures are an excellent business vehicle and can lead to rapid growth of a business that perhaps on your own may not grow as quickly, and if you do need a joint venture setting up of course you know which company formation agent can help you with that :-). I’m very excited and am looking forward to the official launch of New Start Data Limited 🙂

Comments (4)

  1. Sep 24, 2008

    Some great info in there.

    It is important to understand the lines very clearly, what each is bringing to the table and how they will be rewarded for it.

    Pooling resources, skills & talents in a Joint Venture can be extremely beneficial to all parties as you’ve pointed out. Before it does go ahead, everyone must be clear on how they will be recognised as a partner, and what responsibilities they will have.

  2. Oct 6, 2008

    Hi, great post, joint venture can work, but personaly I’m not going to even entertain the fact after having a very bad experience on the last occasion, so people should be aware of the drawbacks also

  3. Nov 13, 2008

    That’s really interesting. I think there are definately major advantages working together with other people on projects. Everyone has different strengths and contacts and you need all the help you can get at the moment getting a new business off the ground.

  4. Feb 19, 2009

    Collaboration is key for projects, as David said it is important to have the right people on board and expectations must be clear.
    Tom is also correct, not only is it important to work with others but also exciting at being able to provide added value in the end product/service with different skill sets.
    I think you hit some very good points there Ozzy, team work makes the dream work.