The Art of the Local Business Joint Venture Part 1

posted on Nov 03 by Tim Conley in the Local Marketing category

How to Triple Your Revenue in Less Than a Year

In a recent talk, I mentioned to the audience that they needed to be doing joint ventures with other local business owners.  Unfortunately, I didn't have time to really discuss what a joint venture is, how to set one up and how to do a bunch of them every year.

Joint ventures (JVs) are very common in the information marketing world, especially online.  Technology and high margins make it a breeze for people to create sales really, really fast.  Offline, well, JVs don't get much attention.  I guess they're not sexy enough, but they work great.

What Is a Local Joint Venture?

A Local JV is when business owner A (or manager) gets business owner B to promote A's product to B's customers for a percentage or fixed split of the revenue.  This can be reversed where A promotes B's product to her own customers.  JVs are not always about adding new customers, but always about adding revenue.  

It tends to be easier to get a customer who knows, likes and trusts you to buy more of what they need and want than it is to acquire a new customer.  I say this because too many business owners focus on getting new customers as opposed to earning more from the ones they have.  When thinking about doing a JV make sure you don't forget the needs and wants of your current clients.

A good way to look at it is to figure out what they buy before they buy from you, what they buy in conjunction with what they buy from you and what they buy after purchasing from you.  This will show you the product holes in your business.  Note: you don't have to ever fill these holes with your own product or service, but there is no reason to not earn some dinero by filling in these gaps with other people's products.

I'm off my tangent now.

So, a JV is two or more businesses promoting one or more products for a cut of the revenue.  From experience, many small local businesses tend to favor you promoting their products to your customers versus them promoting you to their customers.  I always try to make sure we promote each other's products or services.  It is a win/win for both since each side gets new customers and increases their revenue per customer.

Monetization

This talk of revenue brings me to one of the attendees of my presentation.  She got super excited to create a JV so she came up with a postcard idea that sounds pretty good.  She told me her idea and I asked if she was going monetize the promotion.  She looked at me quizzically and said, "What do you mean?"  

Here's the thing.  It's not a JV if you don't make any money or at least don't intend to make money.  Promoting someone else's business can be a service to your customers even if you don't make money, but doing something like that should be in an email newsletter where it doesn't cost you anything.

I didn't want to discourage her initiative so I didn't bring up the other flaw in her JV idea.  She is intending to promote the wrong businesses.  She doesn't know they are the wrong businesses, though.  Don't worry, I'll be seeing her this week and will try to change her mind.

Picking The Right JV Partners

The reason she has the wrong businesses in mind is because they don't have anything to do with her Before, During and After of her customer's buying process.  Or a simpler way of saying it, "They aren't related to what her customers have already purchased from her or why they purchased from her."

I had owned a swimming pool service company and did several joint ventures with other home services companies.  This is the best type of JV.  We all had the same type of customer: homeowners who had enough income, but not enough spare time to do tasks around the home.

Think about it.  To get inside someone's home, you have to develop a lot of trust to get the customer.  Once you have that trust, you can expand into providing for their other needs without actually doing the work.  If you had a housekeeping service, you could get income from carpet cleaning, auto detailing, swimming pool maintenance, and much more just by being the referral source for your client.

If you have a restaurant, do a JV with a nearby dry cleaner.  Every article of clothing could have a coupon for an entree' or bottle of wine or pitcher of beer, etc.  You then pay the dry cleaner a percentage of the revenue that is generated.  If you don't want to track results for the dry cleaner, just pay him an advertising fee.

A jewelry store could JV with a flower shop or bridal store or wedding planner.  Someone comes in to buy an engagement ring, you have a perfect opportunity to earn income from the rest of the "getting married" process.

Obviously, these examples, and the thousands of other industries I haven't mentioned, could be reversed.  A flower boutique could JV with a jewelry store.

Scaling, Leverage and Multiplication

The real power in doing joint ventures with other local businesses is when you do at least one per month.  And don't tell me you don't know at least twelve other businesses in your area who share the same type of customer.  If you don't, then start building your network.  If you're a small business owner you should be interacting with your community, your chamber of commerce and a couple of networking groups.

By scaling, leveraging and multiplying your JVs you could grow your business exponentially and do so at very little upfront cost.  Granted, it shouldn't matter what the cost is if you're making a profit, but that's another pet peeve I have with some business owners that I'll rant about some other time.

When you do a JV with a business, you should promote their products or services if possible and that business should promote your products.  And you should do this several times per year.  

Over the course of a year, you will gain new customers and so will your JV partner.  These new customers will benefit from the JV, too.  Also, many current customers won't take advantage of the JV offer before the deadline ends.  Maybe they didn't open the letter they got or they weren't ready to buy for whatever reason or maybe the need for the offer arose after the JV offer deadline.

I would recommend that you do follow-up JVs quarterly.  This is long enough that current customers don't get numb to the offer and short enough that you can offer your new customers this opportunity.

When doing JVs you should be giving your customers at least one offer per month.  Oh, and take advantage of doing holiday offers, too.

Stayed Tuned for the Next Installment of How the JV Turns

In Part II of The Art of the Local Business Joint Venture I will go into the structure of a JV, how to pitch a JV to another business and what kind of revenue split you should have.  And if I do a Part III, which is highly likely, I hope to do a Q&A post so please ask a ton of questions in the comments.

Cheers,

Tim Conley

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