An Equity Joint Venture: An Option for Small Business Growth and Expansion
Business owners have varied reasons for seeking a joint venture arrangement with another company. Many want to pursue a business operation for which they lack the management expertise; others have a need for a product or service that complements their own business operation. Most often, business owners desire a long-term investment that generates additional cash for their current business.
Research studies show a wide range of businesses that have formed equity joint ventures. For example, small businesses with fewer than 500 employees often form these types of alliances. Even small businesses with no fewer than six employees along with micro business enterprises have been noted to form equity-based joint ventures.
Small businesses that form equity joint ventures represent a variety of industries. Among the industries in which equity joint ventures are popular are computer services, data processing, industrial and commercial machinery and computer equipment, transport equipment, electronic and other electrical equipment, printing, publishing, food and kindred products. We have been having these collaboration conversations with local small businesses interested in pursuing these types of activities during our training in Vendor Boot Camp© for the last five years.
Manufacturers often use the Equity Joint Venture arrangement with their suppliers. For example, a manufacturer may require a part that is unavailable among its suppliers. For that reason, a manufacturer may pursue a partnering arrangement with a particular supplier to form an EJV to produce the part. The equity joint venture is typically formed as a limited liability company. We see opportunities for those Alabama manufacturing organizations to have greater impact when Tier One vendors are developing equity joint ventures with growing local businesses and hiring local talent.
Equity Joint Ventures will continue to matter as small business owners realize the restrictions of bank financing. A go-it-alone business strategy may often limit access to would-be opportunities. The benefits of choosing an equity alliance addresses a company’s limited resources for growth and expansion. With shared investment comes a shared distribution of profits to the partners of an equity joint venture.
Are you are a manufacturer or supplier to a manufacturer? Is your company’s go-it-alone business strategy hindering your access to a target market? Does your company lack the management depth to pursue a new product/service? If your answers to these questions are yes, then let’s continue this discussion and create a plan for an Equity Joint Venture arrangement for your company.
Contact Better Business Better Communities Research, Inc. today to schedule a 1-hour consultation to discuss the first steps to finding the right equity joint venture for your business needs.