Business partnerships and joint ventures and business relationships should be carefully considered
Many advantages may be realized from working with other firms, but the relationship should be properly considered to insure the best results.
September 20, 2013 - Author: Frank Gublo, Michigan State University Extension
Every firm has to perform three essential functions in order to maintain and grow. These functions are production, marketing and sales, and administration. However, the firm often does not have all of the competencies to perform these essential functions at a high level, so the firm is faced with decisions on how to achieve high performance on all of the essential functions.
Many times the firm will hire the competencies needed to improve performance, but on occasion the firm will engage with another business to meet needs or improve performance. This may be as simple as some contract work or much more complex such as a joint venture or merger of businesses.
Potential business relationships should fix business problems. Both business partner should understand and be in agreement as to what problems exist and that joint arrangement can be an adequate fix for the problem. It makes sense to find firms that provide competencies that complement rather than duplicate, in most circumstances.
Potential business partners should be a potential fix to any and all problems. In other words, a business venture should be a regular tool used by managers to maintain and grow their businesses. Often the manager will not consider a venture until a crisis occurs, leaving very little room to adequately consider the terms of the deal and if the venture is the best fix for the problem. In the small-scale food processing business this frequently occurs when orders overwhelm the production capacity of the firm. The managers seek out a contract packager, and are often disappointed with the results due to inadequately evaluating the business relationship.
Evaluate yourself and your potential partner. Do you have the ability to let go, to a greater degree, of certain aspects of your business? Do you and your potential partner have above average communication skills that allow for problems to be fixed quickly and efficiently? These and other self-reflective questions should be considered before entering into a business venture, to insure the best chance of success. Educators at Michigan State University Extension and Innovation Counselors at the MSU Product Center assist businesses in the establishment of good practices to improve business effectiveness. For further information and assistance with employee communications please contact your local MSU Extension office.