Done Right, Joint Ventures are a Win-Win Scenario

Several weeks ago, I wrote about how several of the resellers of our niche online marketing system generate $4,000 in revenue for us.  This was one of the best ideas we have had to sell and market our new product offerrings. 

These types of JV Partnerships are beneficial for both parties in that the partners have reciprocal skills and the partnership reduces the risk of new ventures.

The Benefit of Joint Venture (JV) Partnerships

When we work with our Resellers, we often use Joint Venture (JV) Agreements, because our relatinoships are usually more than just a standard reselling agreement.  We prefer to work very closely with our partners to make sure that everyone's needs are met. 

The most obvious benefit of a JV Partnership is that partners can bring complimentary skills to a new venture.  Our skills are more ingrained in the product development as we come from a programming background and aren't very experienced in sales.  That being the case, we often look for resellers as the best way to reach into a new market.  They have the contacts and the skills to sell our services and we can bring innovative products and services to the table. 

For us, these partnerships significantly reduce the risk of our projects as we don't have to spend a lot of time and money on marketing and sales campaigns to markets who aren't as open to dealing with companies they don't know.  For the resellers, they benefit because they don't have to go through the difficult process of designing and building the product.  There is no upfront investment on their part and they can sell the product or service as they see fit.

You Have to Give to Get

After reading the benefits, you might wonder why we don't exclusively work with JV partners.  Unfortunately, there is no such thing as a free lunch.  What we have to give up most importantly is a high percentage of revenue.  We can't provide a one-time 5% cut.  Well, we probably could but then there would be no incentive on their part to sell the product. 

I woudn't even approach a reseller with a deal unless they are getting at least 25% of the ongoing revenue and a higher percentage of the upfront fees.  We have done JV relationships with smaller percentages in the past but those resellers always lost contact as they realized that the juice wasn't worth the squeeze.

There is also some flexibility and control that you lose if you work with JV partners.  Remember that your partners are running a business as well and they have certain styles that are going to be different than yours.  You have to be flexible to work with them as you should expect of them as well.

But the biggest downside is that if you totally rely on the reseller (or just a few of them) your are placing your business at risk of being at the mercy of another business.  And if you want to be a Lazy Business Owner, the last position you want to be in is one where someone says "Jump" and you have to say "How High".  So make sure that you have some sort of diversity, whether it's through direct sales or through multiple resellers. 

Using a Variety of Joint Venture Partnerships

And don't think that you have to use Joint Venture Partnerships just for sales/marketing and product development.  We have set up JV Partnerships with other companies in the development of our products.  For the small business online marketing system, we used a variety of partnerships in both design and some development to reduce our up-front allocation to be much smaller.  Now those partnerships cost us more on the back-end as we knew it would but when you don't have a mountain of resources, JV Partnerships are a great to build new, niche products and services, while providing a win-win scenario for all parties involved.

[tags]Joint Venture, JV, Partnerships, Resellers[/tags]