Joint Venture Partnering Was The Key To My 8 Figure Exit
By sohailkhan in Blog Post
If youve ever thought of building a business to eventually sell, or even have a business that has enough value to be acquired then you may want to consider Joint Venture Partnering with larger companies (or even competitors) that may be the perfect candidate to offer to buy you out one day…
Let me explain…
In 2006 I partnered with a $160M IT Group to provide 500,000 of their B2C computer hardware customers with our online computer training software (my first company) which eventually turned into an offer to buy us out and integrate us into the large group as our collaboration proved very profitable.
I then repeated this formula in 2016 when I collaborated with a top Corporate sales management company to provide their team with some specialized consulting and training on Joint Venture Partnerships which proved so successful that it again turned into an 8 figure offer in 2017 for my business and IP.
So how do Joint Venture Partnerships actually work?
Joint ventures involve recognising the myriad opportunities out there and leveraging every one of them through partnering. You must seize the important opportunities, be aware of the smaller ones or overlook any minor problems. You’ve got to go all out; this is one of the fundamentals of successful joint ventures and deal making.
A joint venture (also known as a JV or strategic alliance) is an arrangement that will be of mutual benefit between two (or more) people, businesses or companies who have complementary resources or assets that can be leveraged.
What do I mean by resources or assets? I mean products, services, machinery, equipment, buildings, unused capacity and a customer list (or mailing list) that can be leveraged by the owner or whoever approaches the owner with a joint venture proposal.
Joint ventures are known under many names. Some refer to them as “tie-ins”, “collaborative marketing”, “strategic alliances”, “endorsement marketing”, “hidden asset marketing”, “reciprocal marketing” or, as Jay Conrad Levinson calls them, “fusion marketing”. Regardless, all these terms essentially refer to the same thing and, if you just look around, you’ll see many examples there in the world. For example, when you see a commercial for McDonald’s you almost see a pitch for Coca-Cola.
The idea of the joint venture is as simple as: Business A agrees to include Business B’s brochure or an endorsed letter in their next mailing, either for a fee, a percentage, or if Business B agrees to do the same for them. The result is instant access to a whole new influx of customers without having to spend any money on advertising or market research to find them.
A joint venture is a win-win situation because everybody gains and nobody loses. Joint ventures cut through the top heavy expense of finding large numbers of customers from scratch. You don’t need to do any market research. You don’t need to buy a lot of expensive advertising. You don’t need to weed out unqualified clients. Joint ventures drive right to the customer in one swoop. With a joint venture, you make someone else’s already captured customers your client’s customers. You capitalize instantly on the other’s guy’s resources, and he’s glad to let you do it because he will capitalize on yours.
Joint ventures are a very powerful but underutilized guerrilla marketing strategy. Yet, according to another legendary marketing guru (and mentor to a few of the joint venture business experts in the world today, including myself), Jay Abraham, less than 5% of all business owners use joint ventures properly and most don’t know how to use them at all. Joint ventures are successful because of the old business rule that says: “People like to buy from someone they know and trust”.
The best and most well-known example of a joint venture is when one company endorses (recommends) someone else’s product or services to their customer list with whom they have a relationship and both share the additional profits. This is a win/win arrangement!
For those of you who do not know what a customer list is – it is a list of addresses and/or phone numbers/email addresses that a business owns of all the people who have previously bought from them.You have probably already been asked your name, address and/or phone number while purchasing something in a store, or your email when surfing the internet.
The owners can then communicate with you to try to sell you other things.Smart business owners regularly send helpful information to their customer lists, thus building a relationship with them. And when they have a good relationship, it’s a lot easier to get them to buy more. The relationship between a business owner and his/her customers is the most valuable asset that a business has, the value of which isn’t measured in dollars. However, if you know how to leverage it, it’s as good as gold. In fact, when a business is sold, this asset is valued on the balance sheet.
You may not have realized it, but it can cost SIX TIMES AS MUCH to sell to a new buyer than to resell an existing buyer. And, it costs less and less every single time a client buys from the same business again. Eventually, when they buy from the same business enough, all of the money earned is practically pure profit.
On the flip side, using other people’s mailing lists allows you to use their assets without paying for them. This way your acquisition cost is ZERO. More of the profit is yours because you don’t have to pay for advertising expenses to earn them. This is the true power of Joint Ventures – leveraging other people’s resources and assets or even your own for a minimal or sometimes even zero marketing investment upfront.
How To Avoid Bad Joint Venture Partnerships
Not everybody has a good experience with joint venture partnering, so here are a few pointers to help you avoid bad joint venture partnerships:
1. Have your partners sign a Non-Disclosure Agreement (or Intellectual Property Rights Agreement) and have those agreements in your possession before telling your partners everything. Whether you have them sign something or not beforehand depends on the deal and the people you’re working with. If you don’t have a non-disclosure agreement, have your lawyer write one for you. Just be sure to explain in-depth what you need it for so he can draft a good one for you. If you can’t afford to hire a lawyer, do a search for “free non-disclosure agreements” on Google. Save a few and then simply tweak them to include everything you need.
2. Have them sign an Agreement (Contract).
3. Put in your agreement that you have the right to inspect their shipping records, telephone records, etc to see if there is a discrepancy between the two. For example, if they got many clients calling to place orders, and they shipped considerably fewer orders, something may be going on.
4. Never deal with people who seem to be dishonest. Always listen to your intuition (the little inner-voice or feeling you have) when you’re in contact with them. If you have a funny feeling about them, even if it’s tiny, forget about it.
5. Screen your partners beforehand. If your partner lives in the US, go to www.merlindata.com and if they live in the UK go to www.creditgate.com; this is a service used by private investigators. You can do background checks on all your potential associates before dealing with them. Ask other people in your field if they know them and what they think of them.
6. Work with people who have good track records, who are known for their honesty and who have a lot of good testimonials.
7. If you JV online, there is tracking software available and other services that will track all the sales and you’ll know exactly how many items were sold and what is owed to you.
8. If you’re doing JVs offline and you meet your partner in person, you can bring a witness with you to the signing of the Agreement.
9. Offer to pay for everything, the mailing of the letter and all the other real and provable hard costs, then take those costs out of the gross and divide the rest of the profits.
11. If you’re the endorser, you may be able to take the orders yourself in order to: A. Either calculate how many you have received and thus how much is owed to you before sending them (fax or e-mail or whatever ASAP) to the endorser so he can fulfil them or, B. Take the orders, get the money, send the orders ASAP to the endorsee, then pay the endorsee and the broker (if there is one).
12. If you are the endorser, set the deal up so you can offer a special bonus product/service to every paying customer. Every time one of them buys something, they have to come see you to get the bonus and that is how you can keep track of the number of sales.
13. Use a respected third party affiliate tracking service like ClickBank, or any other service that has a good track record. ClickBank will track your sales and then pay you and your affiliates (JV partners) like clockwork.
14. Do a search on their name with Google. Doing this may bring up some interesting information and I’m not only talking about clues about the person’s background or work ethics. For example, I just recently researched a marketer I wanted to send a proposal to and you know what? I learned that he only considers JV proposals from people that take the time to call him. If I had contacted him by any other means, I would not have been able to get his attention. Everybody has their rules, and if you don’t take the time to find out what they are, chances are you will get it ass-backwards and they won’t want to play ball. Do you know what one of my rules is? NEVER call me if we don’t know each other; that is NOT the way to approach me.
15. Only work with warm prospects. Cold prospects are not only hard to convince to JV with you, they are also riskier partners, as they may not think twice before taking you for a ride. Your main focus should be to build relationships with people, and then make them your offer. It takes longer, but is definitely worth it if you are really afraid of being ripped off. What I said previously about avoiding getting ripped off by list brokers also applies here. If your cold prospect is a friend of one of your contacts, have your contact introduce you directly, or just mention that your friend referred you to your prospect. If the prospect values the relationship they have with your friend, they will be especially careful. In other words, you’ll probably be in good hands. If you find someone who has a great reputation, they will probably be a good partner, even if they are a cold prospect. If they make it a point to over deliver, and have been known to bend over backwards to make people happy then, in my opinion, they are almost as good as a warm prospect.
16. Take things slowly with your partners at first and drop the deal as soon as you discover that they aren’t as trustworthy as you thought.
17. Talk about getting out before you get in. Everyone needs to have a clear exit strategy before partnering with others. This won’t prevent you from getting ripped off, but it will help in somewhat minimizing the damage. You want to be able to get out with only a few scratches, not after several big hits that could knock you out and ruin you financially.
18. Don’t commit to anything long-term with cold prospects. Let them know that you are ready to leave the deal at any time; you want them to be careful with what they do, and you also want them to understand if you want out. Ideally, if you are dealing with a new partner, avoid JVs that you can’t easily get out of – even if you do have an exit strategy.
19. Set up an escrow account with a bank. You then instruct the bank to transfer X% of the profits into your special account.
20. Try to find someone who can recommend a good list broker to you. Tell them you want to work with someone that they often deal with (and that they have a good relationship with). Then, when you contact the broker, you explain that their good client referred you to them. Remember that they don’t know how close you are with their client (your friend) so they’ll most likely think twice before ripping you off.
I hope that helps you reach your goal of creating the ultimate win/win business partnership and leveraging that relationship to an eventual exit strategy!