Types of joint venture

#1: Selling to their clients
Let’s say you offer Network configuration services and you approach a hardware supplier. This supplier may just supply the hardware and no more. But many of these customers will need help configuring their networks. This is where you come in.

You investigate the possibility of contacting their clients to supply this service. Ideally, this would be after each hardware sale was made but it could also be a regular mass mailing.

If customers regularly ask the hardware supplier for network support and they can’t meet that demand, you have an excellent opportunity to set up a mutually beneficial arrangement. You approach the hardware supplier with a view to market to their clients, but only your network configuration service, which they do not sell. For each sale you make to one of their clients, they get a commission, say 15%.

They come out ahead and so do you. It takes little work on their part and you get a client list for zero upfront cost.

#2. Selling to your clients
You can also get – in our example – the hardware supplier to market to your clients. However, if you are setting up many joint venture partnerships, you cannot allow them all to market to your clients. Otherwise your client list will be bombarded with offers which duplicate themselves.

Five hardware suppliers all sending literature is likely to annoy your hard won clients. However, a hardware supplier, software supplier, PC support team, software developer and hardware repairs supplier can all send literature without their offers cannibalising each other.

A Little Known Sneaky Joint Venture Trick

You will find it is far easier to get them to sell to your client list than the other way around. But the best possible way to expand your business is to sell to their list.

There is one sneaky trick you can use to get in the door to approach a possible joint venture partner. When you approach them, you say you would like to investigate the possibility of them selling to your client list. This should get their attention nearly 100% of the time. Then, almost as a side note, you say you would also like to look at selling to their clients too.

During your meeting with this company, you can explore both possibilities. Then, if there is too much of an overlap with your existing joint venture suppliers, let them know. Say that you have a policy of minimising duplicate mailings to your clients and that you didn’t know quite what they offered until you had the chance to discuss this possibility with them.

If you do a good enough selling job, they should still see the benefits of letting you sell to their clients. After all, it’s money for nothing as far as they are concerned.

Benefits to you of developing a Joint Venture Partnership

Why should you bother taking the time and effort to establish a joint venture partnership? Let us look at the reasons why…

#1: Acquiring clients - cost and risk
Well, it all comes down to the acquisition cost of a client and the predictable risk. When you work in isolation from other companies, you have to spend money to get noticed. So you place an advertisement and this will only be effective while it is running. The advert cost will cut into the profits you make from any sales. Not only that, some adverts may flop and you could end up out of pocket.

Spending money to acquire clients also has a downside risk attached to it.

But take the joint venture route and you will see an altogether different picture. For example, you team up with one of your competitors, a local network installation company. They approach their client list with an offer from your company. The cost to them is next to nothing as they include a flyer about your services in their usual mailings. You get 2 enquiries and one sale. The introducer charges you a 15% referral fee but you get the client.

What is your risk? Nothing. What is your client acquisition cost? 15%. However, it is a predictable 15%, unlike advertising, which can sink you if you do not monitor your results carefully.

#2: Ongoing Promotion – the golden goose or the golden egg
Furthermore, this strategic alliance you have formed can keep on referring new business to you without further effort on your part. It is like running an advertisement week after week, the only difference being there is no risk to you.

It is rather like having a golden goose rather than the golden egg. You can advertise for clients and when you get one that is like receiving a golden egg. That client may give you repeat business but it will not grow your client bank. However, getting a joint venture set up is like finding a golden goose. They keep referring new clients to you even though you only expend effort in finding this partner at the outset.

#3: High Conversion Rate
Ask any salesperson and they will say the best kind of lead is a referred lead. The referrer has normally established some kind of relationship with the lead, such as a supplier relationship. So long as the referrer has serviced their client well, they will have generated trust and therefore some influence. If they recommend you, your chances of closing a sale with the referred lead are considerably greater than if it was generated from an advertisement. I can vouch for this and you feel it when dealing with the client. Quite often, you won’t be faced with competition either.

Let me summarise the benefits of joint venture:

1. Low client acquisition cost
2. Risk free approach to promotion
3. High conversion rate
4. Ongoing once set up

Joint venture partnerships are an essential part of your promotional mix. They represent one of the easiest ways to get a fast start for your IT business. Just make sure you do a good job with their client. Failure to do so may jeopardise future client referrals.

The facts about how joint venture works in practice

Let me explain about my first experience in this area, what happened and lessons I learnt.
Preparation
I first heard about Joint Venture marketing from Jay Abraham, a well-known marketing guru. He kept on highlighting the importance of forming alliances with other companies and how that may benefit your business. It all seemed to make sense so I decided to give it a try, even though I had no idea what to expect.

I spent some considerable time working out what benefits a Joint Venture partner would have by teaming up with my company. Of course, they earn money on referral fees. But there is more to it than meets the eye. I cover these benefits elsewhere in this report.

Then I created a letter that I could send explaining all these benefits and how it works. A faxable version was also made.

Next I created a telesales script. I am very much a believer in prior preparation. Sure, some individuals may be able to talk persuasively without preparation. But how much better could they be if a tried and tested structure was put in place?

Then I went straight to the Yellow Pages and rated the companies I thought are worth calling.

I then made the calls, altering my telesales script as experience taught me what worked and what didn’t.

My Results

I managed to speak to the decision-maker in most cases. The companies I approached were smallish in size so this wasn’t too much of an issue.

Some secretaries just plain screened me out, despite the fact it was not a sales call. They were either on automatic pilot or were told to filter out all calls that did not fall into a predefined category, such as “customer enquiry.”

Once speaking with someone with authority, some questioning helped me find out if there was any opportunities there. Many times there wasn’t, as they may have covered the services I was offering. Other times there was a distinct opportunity but they just could not (or would not) see the benefit in such an arrangement. Apathy is common with this kind of deal.

However, a smaller number of companies showed genuine interest. In these cases, the literature was usually immediately faxed and a follow up call made a few days later.

The best response I got was from those companies who had immediate enquiries they could not fill that matched the service my company was offering. They could see immediate commissions due to them – very tangible.

Important lessons I learnt:

1. Most of my commissions would come from a small group of joint venture partnerships (the 80:20 rule working here).

2. Potential partners - after being faxed literature – would forget about our arrangement unless I regularly contacted them. They would lose our phone number and say, “I had someone enquire about XXX a couple of weeks ago but I didn’t have your phone number.”

3. Many joint venture partners would exaggerate the number of enquiries they would get e.g. “Oh, we get about 3 of these type of enquiries a week.” Then, when contacting them for hard leads, they would say, “We haven’t had anyone call about this for ages!”

4. The larger the company, the more difficult it is to get all their staff to remember to seek out these type of leads. Also, management sometimes find there is a conflict of interest. One joint venture partnership I set up was in a busy hardware retail outlet. They sold about 300 systems per month. With each system they gave the client a leaflet on our computer training and support services. This was a great arrangement as we got lots of people phoning in for help in setting up their computers and having instruction. However, the salespeople there said about 1 in 10 purchasers asked about computer training. Unfortunately for us, the management didn’t want them pushing our services because they thought it would distract sales staff from their prime role of selling systems. For this reason, they also prevented us from paying their staff a bonus scheme based on the number of referrals they gave us.

5. Joint venture partners can get you into larger sales effortlessly. We found the referrer normally had a good working relationship with their client. Therefore, it was enough for them to say, “If you want some software development done, you should use XXX.” Competition became less of a problem. Also, sometimes you were doing the work under the name of the referring partner. In these cases, everything was pre-sold for you. You just go in to do the work.

Referrer Benefits of Joint Venture partnerships

To understand how to approach a potential joint venture partner, you need to understand the benefits they will get from teaming up with you.

Here is an extract from one of our Joint Venture letters that lists the benefits of referring business to me.

Look at The Benefits

• Extra profit from referral fees.
• Avoids losing clients – keep clients away from competitors who could poach future sales.
• Additional sales opportunities - we often discover areas where the client could benefit from the introducer’s product or service. We will refer these back to you.
• Better customer satisfaction – clients don’t have to shop around.
• No Overhead – you don’t need extra staff, it takes very little time and the fee is virtually 100% profit.

Let’s analyse each benefit from the referrer’s perspective…

Extra profit

They optimise the earnings from their existing clients and it is so simple to do. No need to explain this one!

Avoid losing clients

This is a big concern as their clients are worth their weight in gold. They don’t want to risk loosing them and would ideally like to “ring-fence” them away from competitors. By referring a strategic partner for work they do not touch, they help reduce the likelihood of them straying. I always stress this benefit heavily. Furthermore, they don’t want to risk you stealing their client either. Consequently, I give assurances that this is not going to be the case and if they prefer would put it in writing.

Additional Sales Opportunities

Most IT companies do not contact their existing clients often enough. Therefore, they are usually not up-to-date on their current IT needs. When you are introduced to that client, you have a fresh opportunity to uncover immediate IT products or services that the referring company can provide. This can only be of benefit to the refer.

In addition, if you recommend that the client take action on something that you don’t offer yourself, the credibility of your suggestion can be greater since you don’t have a vested interest.

Better customer satisfaction

It is more convenient for the client if he can always phone his IT guy (or woman) without having to shop around. They’ll say, “John can helps and if he can’t he can put us in touch with someone who can.”

No Overhead

Every business owner hates overheads. Increasing them burdens your business and means you have to consistently outperform your previous sales targets. Stressing they can increase profits without increasing overhead can only be an attractive thing.

You can further clarify by pointing out that the introductory fee is 100% profit. They know only too well that for every $100 profit they may have to generate, say, $200 in revenue after all costs. Therefore, if you paid them a $600 introductory fee - in this example – that is the equivalent to them generating an additional $1,200 in revenue, if you follow me.

As you can see, you need to stress much more than just the revenue earning potential of partnering with your business.

The 7 Secret Steps to Joint Venture Success

Here is the step by step process I employed to make successful joint venture partnerships.

#1: Create your Sales Letter
I created a sales letter which stressed the benefits of why they should consider doing a joint venture with me. It outlined the commission rates (e.g. 15% of all introduced business) and had a freephone hotline number for them to call.

There were two versions of this sales letter: one for faxing and one for posting. The content is the same in each and they look identical. The only difference is the fax version has a fax header. You will need both versions to help you develops effective joint ventured.

#2: Identify possible partners
I got a local Yellow Pages (and similar directories) and went to the section listing computer service companies and even hardware suppliers. Then I went through each, estimating how likely I thought they would have clients that they could refer on to me.

I would grade each company as a one, two or three. One’s were the most likely to refer on, three’s the least. I would write this number on the actual advert.

#3: Contact each company by phone
Then I telephoned each company, starting at the one’s and working my way through to the three’s. I would ask if they did the type of work I was offering. They would think I was a potential customer at first. The conversation would go something like this…

John: “Hello, I’ve seen your advert in the Yellow Pages and was wondering if you did computer training (networking/website design/ software development etc.)?”

Them: “No, sorry but we can’t help you there. Try Slow Joe’s Computer Services.”

Then I would turn the conversation around and reveal the real reason I am calling. To catch their interest, instead of saying we will split some of the business with them, I rephrase it as we want to “buy” the enquiries they turn away. It goes something like this…

John: “Well that’s exactly the reason I am calling. I’m from XYZ and we want to buy the enquiries you turn away. Tell me, do you get asked for this type of service often?”

Them: “A few times a month. We normally refer them to Slow Joe’s Computer Services down the road.”

John: “What size introductory fee do they pay you?”

Them: “None. We just want the client to get someone who can do a decent job for them.”

Next, I test their interest to see if there is any possibility of further discussion.

John: “We are offering a sizeable introductory fee for any business referred to us. Would this be something you might like to look into?”

Them: “What are you offering?”

John: “We pay a 15% commission on all business introduced to us for the first 3 months. Do you think you we could explore the possibility of setting something up along these lines?”

Them: “Have you got any information in writing?”

John: “Sure, but we only want to send it out to those who are seriously interested. Can you see any benefit to yourself in this arrangement?”

Them: “Well, commissions are nice but we don’t want to lose a client.”

John: “Of course. That is why we guarantee to not do any other business with the introduced client. We would refer them back to you. We can put that in writing for you.”

Them: “That is our main concern.”

There may be some immediate enquiries you could handle for them. This gets the ball rolling and gives some momentum to establishing a joint-venture partnership.

John: “Do you have any current enquiries you would like to refer so you can test us out on a trial basis?”

Them: “Well, we are seeing a client of ours tomorrow and they asked about some computer training last time we were there. I will mention you to them.”

John: “Ok, thanks. I will fax you some information out this arrangement. It has our contact details on there too. Look forward to hearing from you.”

Them: “Great. Speak soon. Bye.”

John: “Bye.”

#4: Fax the Joint-Venture Sales Letter
Get it to them straightaway. Don’t delay or they might loose interest and throw it away. Then make a diary note to call them 2 days later.

#5: Follow up phone call
Two days later, phone and say…

John: “Did you get my fax the other day outlining our company details?”

Them: “Yes thanks, but we haven’t decided on anything definite yet.”

John: “That’s fine. Just bear us in mind when you get your next enquiry. We will gladly pay you for those leads you don’t want. I’ll call you again in a month or so to see if we can help.”

Them: “Ok, I will keep your number. Bye”

John: “Bye.”

#6: Quarterly phone call
Make a diary note for 1 months time and recontact them. Ask them if they have any leads this month. Keep recontacting them once every quarter unless you get the impression they really don’t like getting your phone calls.

After a while, they will be expecting your call and you will start to establish some trust. The more they hear your voice, the more likely they will feel they know you. This is the basis for establishing the beginnings of a business realationship.

#7: Fax your details reguarly
Stay in touch with your joint-venture partners. If they havent yet referred any business to you and haven’t enjoyed an introductory fee, they are much less likely to remember you. Therefore, either fax or post your joint venture offer to them on a regular basis.

They may not read it every time, but when they do have someone to refer and the letter hits their desk at that time, what do you think they will do? Chances are they will read it. If they read it, you could get a phone call. If you get that phone call, you are likely to get an appointment. And referred business has a much higher probability of turning into a sale than if it was straight from an advert. Why? Because there is an implied (or actual) endorsement from the referred. This means the client has a higher level of trust and may not bother shopping around.

You would be surprised how easy it is for a busy company to totally forget your offer. I popped in to see one high street PC store to introduce myself in person. I had spoken on the phone to the shop manager before Christmas. He liked the idea of passing on leads. However, he totally forgot about me and it was only early January!

However, when I turned up he said, “Actually, I’m seeing a client tomorrow who is looking for some software development. I will get them to contact you.”

Three days later the client phoned me. This guy earned over $500 in commissions (which his employers did not know about!) and we earned $10,000+ in billable project work over the next 12 months. This highlights how effective joint venture work can be. Just stay in touch with the contacts you initially make. Eventually they will turn into an ongoing business relationship that puts money in your pocket for zero risk.

Finding Excellent Joint Venture Partners

I recommend you hunt down suitable partners using the following sources:

Yellow Pages
Turn to the computer section that shows hardware suppliers, PC support companies, training companies and so on. These are likely to be local suppliers and the chances of striking up a business relationship goes up. There is something about being local to another company that makes these kind of relationships work. You can visit the owner or have personal contact with his or her staff.

Having stated that being local is an advantage, do not ignore the Yellow Pages in other areas. Go to your local library or seek out another source for Yellow Pages that are adjacent to your area. These can supply an additional source of companies for you to approach.

Online Search
Go to google.com and enter…

Your City followed by computer training.

e.g. enter “New York computer training”

Try substituting computer with “PC training” or “MS Word training” or “PC support” or “PC hardware”. I’m sure you get the idea. Make a list of local companies that come up. Print it out and cross off the ones that are also in the Yellow Pages. You don’t want to end up contact these companies twice. It will make you look foolish and disorganized.

Local Papers
You will often find the smaller computer businesses advertising in the local papers but who might not be found in the Yellow Pages. This could be because they have just started out and so would not have their listing entered into the Yellow Pages yet. Alternatively, they may be using their home number and not paying for a Yellow Pages display ad as it is too expensive for them or they do not know if it is a viable source of advertising.

Check out these adverts as these smaller companies may face work that is too big for them. You are a specialist in your field and you can really help out, helping them keep their client and earn a good commission too.

Business Catalogues
These come in three forms: online, CD and book. The best types are CD and online as you can narrow down your list of target companies by industry sector, location and in some cases by company size. There are several companies that provide these kinds of services. Dunn & Bradstreet are worth a look (www.dnb.com).

Bear in mind that these services normally cost. The charge is usually by the number of items found in the search. E.g. if you wanted all computer service companies in New York and it returned 500 entries, you would be charged 500 x cost per entry.

Endorsement marketing – what, why, how and when?

What is it?
If you endorse another product, it means you recommend it. In the context of this report, it means having your (in most cases) product or service recommended to your joint venture partners customer.

Why use it?
Being recommended means the potential buyer has a favourable image of you before you even meet them. It sets the tone nicely for a potential sale. You can still mess things up but all things being equal, your closing ratio will be much higher when backed by a personal recommendation.

Cold calls are on the opposite end of the marketing spectrum. They have no personal recommendation to them and consequently the closing ratios are much lower.

How to use it
The best way to use endorsement marketing is to get your client to make a personal recommendation by telephone call to their client. Get them to say, “These people really do a great job on software development. We have recommended them before and they always get the job done on time.”

The second best way is to have them write to their clients as if the letter is from them (your joint venture partner). This kind of letter is warmer because the customer already knows the letter writer. In actual fact, it can just as well be you who writes the letter for them.

The third best way is to have a written testimonial from the referring partner. Mention this near the top of the sales letter.

The fourth best way is just to include your sales literature with a mailing that your joint venture partner is sending out. The fact it is also enclosed has an implied endorsement. Combine this with the testimonial for maximum effect.

When to use it
Always go for an endorsement – if you can get it. A joint venture partner may not always want to endorse your product or service. They may be too afraid of you doing a poor job and souring their client goodwill.

As mentioned above, you can still benefit from an implied endorsement just by having your literature bundled with their mailings. Bolster your sales letters with lots of testimonials from happy clients. This will build on the trust already added by the implied endorsement.

If your relationship is good, you could also use testimonials (written endorsements) from multiple joint venture partners, all on your same sales literature. Get their permission first and then liberally sprinkle their good words about you throughout your sales message.

Win-win deals for an enduring strategic alliance

For a joint venture partnership to work, the deal has to work for both parties. If it is skewed too much towards one of the parties, the loser will become bitter, feel cheated and ultimately want to dissolve the arrangement.

The key here is to get an equitable deal from the outset. It is much more difficult to renegotiate the deal than it is to negotiate one from the beginning. Imagine having to approach your joint venture partner and say, “Sorry, but I know we agreed on 25% but I now think 15% is fair.” You could upset the relationship, appear incompetent or both.

Payment methods

Pay by lead
Here, you get pay for each lead as they come in. You agree a fee at outset. This is the riskiest approach as you don’t know the quality of the leads coming in. It also encourages the referring to product leads in volume of any quality. You only want good quality leads or you will waste your valuable hours following up time wasters.

Pay by results
This is the least risky approach and I heartily recommend it. You pay a commission only after the client has signed up and paid you. Your cashflow is better this way. In addition, if you are having problems getting the client to pay, you don’t have to shell out a commission that could upset your finances.

Most companies you deal with are happy to work on this basis. It is easier to setup and both parties can minimise the amount of administration required to run a referral system.

Commission rates

I recommend you pay a percentage of the work done. For example, if you got 5 days work at $600 per day, that equates to $3000 work. If you set a commission rate of 15%, you pay 15% of $3000 which equals $450. This only gets paid once the client pays you.

The alternative of a flat rate commission is unfair on both parties. A larger deal should have a larger incentive to be set up because the rewards are potentially greater for both sides. A flat rate deal means the referrer has no more incentive to bring in a big project than a smaller one. Not a good idea.

To my mind, 15% is a fair commission rate. If the referrer has to do much more work their end, you could raise this rate. But as a starting point it is sound.

Time periods

I recommend you have a cut off point where the referrer is no longer entitled to a commission. You pay them their 15% - as agreed – for the initial work. However, any work you do with that client outside a 3 month period from introduction, you get 100% of the commission.

The way I explain this to my clients is to say, “We use this method to acquire clients for our service, at a cost of 15% of the original work. Anything beyond 3 months we get 100%.” I don’t think I have ever had anyone question this. Just tell them that is the deal! Most will accept your suggested rates as they perceive you as being the one in control and having experience in setting up these joint venture schemes.

Reporting back

You must keep your joint venture partner informed of progress. I recommend by fax or email as they don’t want you constantly phoning them each time a sale or project gets advanced.

Just tell them significant points such as:
• Client agreed to sale
• Client decided not to buy
• Project completed
• Client paid and commissions being sent
• Client requests service that referrer can provide

Prompt Payment

When that client commission comes in, get your refers check out the door as soon as it clears. Then give them a phone call to thank them for the passing on the lead. Everyones in a good mood when they are paid and it helps to cement the relationship.

Questions & Answers

Is a Joint Venture Partnership the best way for me to get started?
Not necessarily. If you have little experience, you may not want to jeopardise potentially lucrative partnerships by doing an amateurish job. Instead, get some experience under your belt, say 3 months, and then initial your marketing campaign using this method.

Should I put all my energies into this type of marketing?
No. Joint Venture Partnerships as excellent but they should only be part of your promotional mix. You must constrantly experiment and try out new types of marketing. Keep testing all the traditional ways, such as website marketing, classified and display advertising, mailshots and telesales. You may find one of these outperforms Joint Ventures by a mile! Even if it does, keep up the other methods if they still prove profitable. Once you get more work than you could possibly handle, you can always hire staff, subcontract out the work, raise your rates or only choose the projects you would enjoy doing.

What should I do if someone just says “Send us your literature”?
Play it by ear but nine times out of ten you will be wasting your time. It is a classic brush off. If you feel there is a geniune possibility for a partnership then you might like to fax them something. Otherwise, just say, “Perhaps we should leave it unless you are seriously interested.” They can always butt in and say, “But were are!”

Do I have to stay in touch with joint venture partners once my literature has been sent?
Absolutely! If they don’t have any immediate leads for you, they are likely to forget about your offer within a week. You must keep contacting them and keep sending them literature. You want them to think of your company the instant their customer asks for your kind of work.

Do joint venture partnerships really work?

Yes! But you do have to work at them. Don’t set up all these partnerships and not follow through with regular contact. The real money comes from establishing a long-term win-win partnership where they know you well and you know them well. If the follow up is poor, your results will be poor. Ignore the hype of effortless money with this type of arrangement. You must expend effort to make money. There are no short cuts. But, there are effective methods to help you achieve your monetary and business goals. This is one of them.