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Forming Online Joint Ventures

Posted on 4.27.2010

This is the year of the joint venture. That is, if you plan on being part of one of the hottest and fastest-growing niches in the Internet marketing space.

Forming a joint venture (JV) allows you to build on your company’s strengths while spreading your costs and risks and earning a profit. JVs also allow you to get improved access to the financial resources of your partner while adding economies of scale and advantages of size.

By creating a JV with a non-competing business, you can gain the competitive advantages of preempting your competition while creating a channel to facilitate a greater speed-to-market for your products or services.

Joint Venture Basics
A joint venture is an agreement between two parties to make money by leveraging the assets of each. As JVs apply to Internet marketing, this most often involves a website owner with a product to sell partnering with someone with a large mailing list to which the product can then be sold. The list owner sends a sales letter for the product to his recipients and both parties split the profit based on a pre-determined percentage. Discussions for this percentage split usually start at 50/50 and are adjusted based on what each partner brings to the table.

The best JVs can continue for an indefinite period of time and earn significant revenue for both parties. However, this is rare. Most come together for a brief period of time to promote a specific product to a precise audience. This is because the value that each party brings is usually limited and workable only for a set period of time. For example, it only makes sense to send a sales letter to your partner’s list so many times before the recipients either buy your product or get burned out.

Willie Crawford of EasyPushButtonTraffic.com is one of the most respected joint-venture experts in the industry and has over 10 years of experience. He says, “You need to approach any JV from the point of view of what the other person will get from it, not what you want from it. You need to think of why they want to do business with you at all; and not only create value for your partner, but for your partner’s customers — they are the ones who must benefit for a JV to work.”

There are many ways to find the right JV partner. One popular method is to contact a joint venture broker.

Joint venture brokers specialize in finding the right partner for each party. The advantage of using a broker is to save time and energy by pre-qualifying potential JV partners to make sure they are reputable and fit nicely with your product or e-mail list. Brokers earn a small percentage of the profits, customarily in the range of two to ten percent.

Forming a Joint Venture
For tax reasons, it’s important to structure any JV agreement as a joint venture, and not a partnership, as partnerships include significant legal ramifications that can make you liable for a partner’s negligence or malfeasance, whereas in a legal joint venture your liability is much more limited. Ask an attorney to give you more advice on this topic.

The formation of a JV involves the following steps:

1. Strategy Development: Strategy development involves studying the viability and objectives of a joint venture. This is where you focus on the major issues and challenges involved in putting together a JV.

2. Partner Assessment: This is where you analyze a potential partner’s strengths and weaknesses, and come to understand their motives for working with you. This is also where you address gaps that might exist for each other in terms of what each brings to the table.

3. JV Agreement Negotiation: This involves making sure that each party has realistic goals; defining each other’s contributions and percentage-splits, as well as determining how to protect any confidential information.

4. Joint Venture Operation: This is the fun part — where you launch the JV and watch the results. Once a JV has begun, this is the stage where you assess the performance and shut down non-converting tactics and ramp up profitable ones. You may change e-mail copy or alter the price of your product based on split testing.

5. JV Termination: When a JV’s objectives have been met (or not), it’s time to shut it down and look for another. Other reasons you might end a joint venture could be that the business goals of one of the partners have changed, or you have legal or financial conflicts with your partner. Always include a way to end a JV when putting together the agreement.

Joint Ventures in Action
Joint venturing sounds simple and in many respects it is. What you might be wondering about is the potential for real profit. Consider this story from Sohail Khan, president of The Joint Venture University: In 2006 he owned a large Internet training business in which he sold a majority stake to a multi-million dollar technology company. Two years later, the technology company went bust and Khan lost everything, including his house.

In early 2009, Khan set a goal to make one million dollars within 12 months — using nothing but his JV knowledge. Starting without a product or business, and little capital, Khan sought out his first JV with a British company that had over four million postalmail customers. He approached the company owner, found out what their customers needed and, using Camtasia and some freelancers in India, created a simple Internet training product to sell to the customers of the list owner. A few months and a million dollars in gross sales later, Khan partnered with some top Internet marketers and founded the JV University.

The key, according to Khan, is to “Find out what prospects really want — not just what you think they need. Look to create win-win scenarios, and make sure you know who you are dealing with. Do your due diligence.”

When seeking out a JV partner, I suggest starting at the top. Begin with the most respected person in your industry. You might get rejected the first time, but at least that person will know who you are and likely remember when you come back with more experience and some successes under your belt. There are many stories in the JV world where the top person in a niche was actually in need of partners, and many first-timers were able to start and stay there. Don’t sell yourself short.

Another key to making JVs work is to use endorsements from respected professionals in your sales material. Promoting any product or service using the power of an e-mail endorsed by a respected authority in your niche will almost always increase conversions. Having people who are already known, liked and trusted by their audience will make selling that much easier. Often, these experts will provide a testimonial for a fee or split of the revenue.

For a successful JV, you must go through many of the same steps as in selling any product — knowing your customer and their problems, and understanding how you are going to solve them. By taking those basic marketing principles and adding the techniques and strategies of joint venturing, you will take your business where it needs to be in the coming years, and beyond.

About the Author: Mike Evans is the Director of North American Sales for KeywordSpy.com, a pay-per-click and SEO research firm that tracks over 127,000,000 keywords. Log in to your Website Magazine account for a 30 percent discount code for the service. Contact Mike at Mike@KeywordSpy. com or (212) 501-2910.

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