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Experienced Business Guide |
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In this Section Creating powerful joint ventures is really simple. If you’re looking for people to host your products (you want to be a beneficiary), here are three simple steps: Step One: Finding-- Use the resources listed above to find businesses that meet these three requirements: (1) they have a strong relationship with people who would serve as good prospects for your offer; (2) they periodically contact these people in effort to build good will; and (3) they have a large enough mailing list or database for a joint venture endorsement to be attractive to you. Step Two: Contacting-- Make a list of those potential associates found in step one, and contact the owner of each business by phone, fax, or mail. People get so much junk mail these days—so don’t write some joint venture proposal and then email it off to the people on your list. However, if you build a very large list of contacts, it may take a few weeks to contact each person by mail or fax and ultimately phone. So email each of them an “ice breaker” message—then when you contact them on the phone, you’ll be more welcome. Your ice breaker message can say something like, “Hi Tom, This is Robert Johnson from Bobby’s Widgets ( http://www.bobbywidget.com ). I’m at your website right now, and want to tell you that your services look great! I think my customers are well-suited prospects for your business and vice-versa. What should I do if I want to send a few of them your way?” Make sure you personalize the messages. As you build your list of contacts, put their contact information into an email database program. This will allow you to personalize your messages and contact each associate on a regular basis, which is important for building a relationship with each person. Do this even if you don’t set up a joint venture at first with a particular person... sometimes the relationship needed to joint venture between two entities grows gradually. It’s important that you make your initial joint venture proposal by mail, fax, or phone. Ultimately, you want to contact the person on the phone. When you contact each person to propose a joint venture, you may use the following as a guide as to what you should say: Our customers are good prospects for each other’s businesses. I would like to form a strategic alliance with you. I know you’ve spent a good deal of time, effort, and money building good will with your customers. This alliance will help you capitalize on this asset—your good will among customers, in a way more effective than any other I would like you to sample my product so you can decide for yourself. I think my product would benefit your customers—and if you agree after sampling the product—I would like to make your customers a special offer, but I would like you to introduce it to them. This form of “endorsement” marketing is a very effective way to capitalize on the good will you have with your customers because when you endorse someone else’s product to them, they’re more respondent than when you try to sell your own products to them—and I’d be happy to give you most of the profits from the deal. But first, I want you to review my product or testimonials so that you can provide your customers with a valuable and ethical endorsement. Because of this special offer, your prospects will be thankful that you “went out and found” this great offer for them. Of course, we’re not saying you should read off this list. If you’re doing this on the phone, just try to work these points into the conversation. If the person is interested, tell them about your product, how you want them to sample it, and the idea you have in mind. Make a special offer In order to get many publishers to endorse your product, you have to make him feel like he’s doing something good for his customers—so make a special offer that he can pass on to his customers. That might be a 50% discount, 25% discount, special bonus offer, or what have you. This special offer will also help in writing the endorsement letter as the endorser can show his audience how he went out and arranged a special deal for them. Take away risk Make sure the host knows that his customers can buy from both him and you—you won’t be taking away any customers or any business. Let him know that if he wants, he can test the endorsement on a portion of his audience to see if they respond positively—and if they do, he can then roll out the endorsement to his entire audience base. Offer to help write the endorsement. Also tell him that if he wants to make the endorsement by interviewing you, you’d be happy to do an interview. Make it financially appealing Give an example of figures that could result from the endorsement. Tell him responses are usually four to seven times higher when someone endorses a product to their customers rather than offers their own product. Based on how many audience members he has, you could say, “Well, if you have 8000 customers and subscribers, and if 10% of them ordered, that would be 800 times $80, which is $64,000 gross. And after the costs, 60% of the profits would be about $34,000--and if this works out, Tom, I have some other products we could use to repeat the same earnings.” Notice, this is the first time in the conversion you mention a specific commission. Then say, “Does 60% of the profits sound good to you?” Don’t be afraid to give examples like this—it excites people. Then, do what you must to settle the deal. Step Three: Contracting-- Once you’ve reached agreeable terms, get a contract signed. Big contracts scare people, and simple contracts are just as binding. This is not intended to be legal advice; get a lawyer if you must... but a simple contract is very easy to create. Outline the terms of the deal... what you agree to do, and what the other person agrees to do... write down the commission terms and everything you agreed on. Then get the contract signed. That’s all you need to do in order to form profitable joint venture deals. As your customer base and ezine grow, you will find it easier to set up deals by offering cross-endorsements, in which one person endorses your product to his list and you do the same for him. So let’s review the three simple steps...
Finding and Forming Joint Ventures as a Host It’s relatively easy to form joint venture deals as a host because anyone who would deny himself or herself the opportunity for you to endorse their product under reasonable conditions is a fool and will be a total failure in business. There are many benefits to hosting a joint venture. First, as previously stated, the response rates are tremendous. Second, as a host, you can test the product’s appeal to your customers—if the product has great appeal, maybe you would like to add the product to your product line. Third, you don’t have the time, money, or resources to create every product that could possibly benefit your customers. By endorsing the product, you still get to profit from sales of that product even though you didn’t have to go through the trouble of creating it. We recommend endorsing a high-profit product. In joint venture endorsement marketing, it’s easier to get 100 people to send you $300 than it is to get 1,000 people to send you $20. You mainly want to look for re-run ads... but here’s the secret: many times products are advertised so much through associate programs and so forth, that you want to make the endorsement before the product’s life cycle burns out. Therefore, you have to watch re-run ads closely to catch it before it comes too big. After you find a product you’d like to endorse, follow these guidelines:
Never accept a standard distributor or associate fee when making a real endorsement.
Explain to the beneficiary that the real money is in the back-end sales. And since any people that buy his product based on your endorsement have been “back-ended”—he can be sure these are very “back-endable” customers. Therefore, he shouldn’t worry about the profits on the initial sale, but should take the customers at whatever he can get them at—especially when he’s not paying for advertising costs—and focus on the profits he’ll make on the back-end. Tell him that many businesses earn 16 times the amount of money on back-end sales than on front-end sales.
Attracting joint ventures...
The more attractive you become as a host, the more attractive you are as a beneficiary, as very few direct marketing companies will refuse good cross-endorsement opportunities. Part of making yourself attractive for joint ventures is creating a strong competitive advantage—smart direct marketers always work with related businesses that have a strong competitive advantage (USP). Joint venture endorsement marketing should be approached from a scientific marketing standpoint... you should do careful market research to find all the businesses that are attracting your type of prospects and customers. Joint venture endorsements should be focused on results—not general effect. Furthermore, joint venture endorsements should be tested before being rolled-out onto the full scale. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Sample Joint Venture Agreement JOINT VENTURE AGREEMENT AGREEMENT This JOINT VENTURE AGREEMENT AGREEMENT is made on ________________, 2002 between ____________________________________ and ________________________________________. RECITALS The Joint Venturers have agreed to make contributions to a common fund for the purpose of acquiring and holding: ____________________________________ ______________________________________ called the business interest. The Joint Venturers consider it advisable to acquire and hold their business interest through a nominee so as to avoid the necessity of numerous separate agreements, to maintain the legal title to the business interest in a simple and practicable form and to facilitate the collection and distribution of the profits accruing under the business interest, and has agreed to act as nominee of the Joint Venturers with the understanding that he is also acquiring a participating interest in this joint venture on his own account, It is therefore agreed: 1. Purpose. The Joint Venturers form this joint venture to acquire and hold the business interest in common and to provide the finances required for its acquisition. To the extent set forth in this Agreement, each of the Joint Venturers shall own an undivided fractional part in the business. The Joint Venturers appoint as their agent ___________________, whose duty it shall be to hold each of the undivided fractional parts in the business interest for the benefit of and as agent for the respective Joint Venturers. 2. Contributions. The Agent acknowledges that he has received from each of the Joint Venturers, for the purpose of this joint venture, the sum set after the name of each Joint Venturer as follows: Contribution to Name Joint Venture. 3. Acquisition of Business Interest. The Agent is authorized to acquire and hold in his own name, but on behalf of the Joint Venturers (of which the Agent is one), the business interest, and to pay $__________ for it as follows: $__________ in cash, and the balance of $__________ by a note in that amount. The note shall bear interest at the rate of ___%, shall be due and payable on ___________________, with repayment privileges, and shall be secured by ___________________________ _______________ which the Agent is authorized to execute and deliver. 4. Profits. The Agent shall hold and distribute the business interest and shall receive the net profits as they accrue for the term of this Agreement or so long as the Joint Venturers are the owners in common of the business interest, for the benefit of the Joint Venturers as follows: Name Proportion ______________________________ _________________________________________________________________ 5. Expenses of Venture. All losses and disbursements incurred by the Agent in acquiring, holding and protecting the business interest and the net profits shall, during the period of the venture, be paid by the Joint Venturers, on demand of the Agent, in the ratio which the contribution of each Joint Venturer bears to the total contributions set forth in paragraph 2; 6. Liability of Agent. The Agent shall be liable only for his own willful misfeasance and bad faith and no one not a party to this Agreement shall have any rights whatsoever under this Agreement against the Agent for any action taken or not taken by him. 7. Term. This Agreement shall terminate and the obligations of the Agent shall be deemed completed on the happening of either of the following events: (a) The receipt and distribution by the Agent of the final net profits accruing under the business interest. (b) Termination by mutual assent of all joint ventures. 8. Compensation of Agent. Unless otherwise agreed to in the future by a majority in interest of the Joint Venturers, the Agent shall not receive any compensation for services rendered by him under this Agreement. In witness whereof the Agent and the Joint Venturers have signed and sealed this Agreement. _______________________________________ ________________________ _______________________________________ ________________________ _______________________________________ ________________________ Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Seven Laws of the Business Buying and Selling Jungle We’ve worked with many business sellers and many more potential business buyers over the years and let me tell you, it's never easy getting a deal accomplished! We strongly believe and firmly advocate that the absolutely best way for an entrepreneur to successfully get into business, or expand what they already have, is to buy an existing profitable company. But there are many obstacles and pitfalls along the way. It really is a jungle out there! To help those who are considering buying or selling a business, we offer the following overview of what we think are the seven most important Laws of the Business Buying and Selling Jungle. Jungle Law #1: Lawyers Are Deal Killers! There certainly is an important role for a competent commercial law attorney to advise and prepare the legal structure of a business purchase and sale transaction. The problems arise when lawyers see themselves as business negotiators whose mission is to get the “best deal” for their clients. They frequently forget that the ³best deal² has to involve both parties, the buyer and the seller, and that compromise is usually the best solution. Lawyers generally have a difficult time with compromise in this type of situation because they often see their role as advising their clients on how to get the better deal. Usually, an attempt at a lopsided deal for either party will result in “no deal” at all. Jungle Law #2: A Business Is Worth Only Whatever Someone Is Willing To Pay For It! Buyers and sellers are natural adversaries; the sellers want as much as they can get and the buyer wants to pay as little as possible. So, what process should you use to value a business? Forget about putting a value on the assets. Forget about comparing the business to the one in the next town. Forget about all the ³rules of thumb² like X times gross income or some dollar amount per account or any other shortcut formula. A business value, and therefore its selling price, only makes sense when itıs based on the capitalized earnings stream. Most small businesses sell for a price in the range of 2-5 times earnings before interest and tax expenses are deducted. Jungle Law #3: A Business Buyer Is Really Buying A Stream Of Earnings! The assets of the business are just the tools of the trade that enable an earnings stream to be realized. Without the earnings stream, the business essentially has no value. You should note that in using this method, a business may actually be worth less than its fair market asset value or in many cases worth substantially more. A seller will be able to get the most they can for a business by showing a buyer the true investment value in the business based on provable earnings. Jungle Law #4: Most Sellers Are Fibbers! (Or They At Least Stretch The Truth) A buyer should approach all information provided in the sale with some skepticism. Buyers are making a major financial decision and should carefully consider all information presented during a detailed due diligence process. If a buyer approaches the purchase of a business with a good healthy dose of “prove it to me”, then it will be difficult for them to get burned. Jungle Law #5: Always Assume There Are Skeletons In The Closet! Most businesses have some negative feature(s) that the seller will be reluctant to talk about. You can be sure that any problems will come out later as buyers begin analyzing the business (due diligence), and it could kill the sale if the problems are perceived as cover-ups. This is because buyers will ask themselves (logically) “if they hid this fact from me, what else are they hiding?” If the negative aspect(s) is clearly presented and discussed with the buyer, it may not be a serious problem because the buyer may feel that it can be overcome. The seller should strongly consider this and determine all of the possible negative factors that could affect the sale of the business. Jungle Law #6: Negotiations Must Stop At The Signing Of The Purchase And Sale Agreement! Once both the seller and buyer have signed the Purchase and Sale Agreement, there is an excellent chance that the sale will actually take place. But, there must be an end to the negotiation process or things will begin to unravel. The deal at this point is like a house of cards with many parts of the negotiated deal contingent on another part. Trying to reopen negotiations after a Purchase and Sale Agreement has been signed will most likely lead to a collapse of the entire deal. Jungle Law #7: After Buying A Business, Do Not Change Anything (At First)! Of course, this doesnıt hold true if youıre buying a turnaround situation; but in general, if the business you are buying is profitable, leave it alone while you learn how to manage it in accordance with the status quo. One of the experiences I have had that best illustrates this point is as follows: One buyer of a fast food chicken franchise soon after the closing changed meat suppliers because he found that he could get the chicken at 10˘ a pound cheaper. What the new owner did not realize was that these chicken pieces were 25% larger than those provided by the original supplier. The problem with this is; the franchise doesnıt sell chicken by the pound; it sells it by the piece. The new franchise owner completely wiped out his profit margin by paying a smaller price per pound but delivering to the customer 25% more chicken at the same retail price! Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Best Practices and New Product Development How quickly an organization can design and develop successful new products is critical to its competitiveness. Researchers at Arizona State University and the University of Minnesota are helping to expedite the innovation process by determining the impact of "best practices" and how they are effectively shared. Hand-in-hand with the importance of examining best practices are the issues of design process maturity (how well the system does what it does) and diffusion (how widely and how often the organization performs the best practice). The researchers have gained the following important insights from studying more than 40 companies to date: The success of the new product depends on selecting the right projects, involving the customer throughout the process, and handing off the project in a smooth fashion to marketing and manufacturing. The timeliness and cost effectiveness of the new product development process depends on how human resources are managed in a functional and cross-functional manner. Improvement in process cycle time occurs through intelligent bottleneck management of the project stream. Product success is driven by activities that occur at the boundaries of the new product development process: customer involvement (the boundary between the organization and the customer), project selection (the decision of what project to work on), and manufacturing and launch preparations (the activities that ensure a proper hand-off between design and manufacturing/marketing). Product success also is strongly driven by concurrent engineering and project management — activities involving the way in which functional and cross-functional resources are utilized. Cycle time improvement is strongly driven by project selection — activities that carefully manage the pipeline of work in the new product development process, ensuring the resources are not over-utilized and project priorities are constantly updated. The researchers examined two companies in the defense sector to understand how best practices were diffused into project teams and organizations. They found that both the quality of implementation and its strategic relevance determines the impact of a best practice. A best practice needs to be implemented well, and for the right reasons, in order for its full benefits to be realized. When companies adopt bundles of best practices simultaneously, they in essence reengineer their process. In order to understand how companies were reengineering their new product development process, the researchers studied six companies that were at various stages of the reengineering process. They found that in order to succeed, companies needed frequent communication between the reengineering team and senior management, and that senior management needed to heighten awareness of the importance of change. The researchers conclude that the adoption and diffusion of best practices in new product development is a complex process that needs to be understood from a variety of theoretical perspectives in order to make sense of the phenomena. |
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