Want to talk about all the leads your business can handle? Of course!!
Joint Ventures (JV’s for the cool cats) are one of the most powerful ways to multiply the rate at which your business grows. They’re super low cost and can have massive impact on your business performance.
- a trusted introduction to your business
- access to untapped target market
- value for everyone (a symbiotic relationship).
A JV is another business that has the same target market and they endorse YOUR product or service to their customer base. When you have multiple JV’s your business really starts to move. And you start having the good problems to solve – like how to deal with TOO MANY leads coming in!
The value for the JV partner is usually a revenue share arrangement (i.e. commission on the sale), but you can create and negotiate (maybe an exchange of services, or you refer their service to your customers, etc).
Make sure you find a JV who services the exact same type of clients that need or want what you sell.
Example: A Florist.
We all know that florists sell flowers. You can imagine that a good day for a florist is when they sell flowers for a wedding. There’s normally plenty of expensive and nice flowers at a wedding because they look and smell great and play a big part in creating a beautiful atmosphere. The standard cost for flowers at a wedding is often in the thousands – generally around the $3000 mark.
Now, what we discovered about florists and weddings is that they are only one part of the ‘event chain’. What that means is that there’s a number of other businesses involved in making the event happen – not just the florist. And considering leverage is one of the major levers of business, let’s see if we can leverage the other businesses in the ‘event chain’.
So what are the other businesses in the ‘event chain’? Well, a wedding doesn’t start unless someone (usually a dude) decides to purchase an engagement ring from a jeweler.
And then once the marriage proposal has been accepted (let’s say 90% of people say yes because I’m sure you’ve heard the stories too!) the rest of the event chain kicks into gear. In the majority of cases the first thing for the new Bride-to-be is that the venue is booked for where the ceremony is to be held – church, chapel, synagogue or other.
And then it could be highly necessary to hit up the wedding planner. Everyone knows its a big deal to pull off a decent wedding. There’s a lot of moving parts that need to be considered. This can be stressful for the bride – especially if they have to hold down a full time job as well.
Next is to secure the venue of the reception … Then the wedding dress needs to be chosen at the price that’s suitable.
And then comes our florist. The bride will want to select her flowers for the wedding and the reception and ensure they look the part.
After the florist comes a wedding cake, and then the invitations need to be created and printed…and so on. Maybe hiring a limosine or a DJ. The travel agent, the honeymoon and the hotel. And then catering has to fit in there as well.
So, what we’ve identified is a number of lucrative JV partners that the florist can build a relationship with. Now, the businesses above the florist in the event chain have the potential to endorse and send brides (prospective customers) to the florist. It’s important to note that the florist has no control over the flow of brides. So, it’s critical to create an attractive and compelling offer with these organisations so they feel it’s necessary to send prospects to the florist.
So what about the businesses after the florist in the event chain? Well, here’s where the florist has all the power because they ‘own’ the relationship with the customer. By creating a sequence of processes and procedures they can ensure their customers use those businesses the florist recommends – and so the florist can negotiate a deal with the business owners below.
Now it’s time to have a look at the numbers the JV’s can produce for the florist.
Assume this florist creates a JV with only one business of each type in the event chain. To be conservative in our assumption, is it fair to say that the florist would receive at least ONE referral each month from just ONE of the businesses above them?
And is it fair to assume that the florist can easily send at least ONE referral to each of the businesses below them in the event chain?
Yes, it depends upon the size of the business in the event chain. But they wouldn’t be in business for very much longer if they couldn’t refer at least ONE customer per month! These numbers are super conservative.
As we said earlier, the average bill for a florist is $3,000 and so just ONE referral per month from the businesses above them converts into a customer then we can say that the florists revenue will now increase by $3,000 per month or $36,000 per year.
And we do the same for the businesses below the florist. Let’s be conservative and say that the florist negotiated a 10% referral fee. Starting with the wedding cake (normal average of $3,000 as well) a single referral each month provides the florist with an additional $300 (or $3,600 per annum).
And now the printer. Let’s say the average printing costs are $1000. So the florist can make an extra $100 per month or $1200 per annum.
If we stop the calculations there (from just 3 JV’s) we can see the following starting to surmount:
Wedding Cake: $3,600
Total: more than $40,000 per annum!
So, you can quickly see how the referral fees can add up and make a huge difference to the florist. Imagine if the florist gets referral fee’s from all the other vendors in the event chain?
Now the same applies for businesses that aren’t in a chain. They just need to identify which businesses are working with the exact same type of clients that might need or want what they sell.
Yes, this JV strategy looks easy but it sure isn’t. It takes time to properly identify who would be an excellent JV for your business, how to approach them and with what offer, what order to approach the JV’s in, and when to approach them. It’s critical to do this with ease and grace otherwise you can burn relationships and end up with nothing. Believe me, I’ve accidentally burnt relationships in the past and they didn’t want to talk to me again – they didn’t want a bar of it and I had no idea how to repair it. Luckily that’s all changed after I did a heap of work on my communication skills.
Conservatively, lets have a look at your business. Let’s say that from a dozen JV’s you only get 3 referrals per month. So how much revenue does that equate to per month and also per annum (just multiply by 12)?
Before we move to the next lesson, do you remember how we talked about the power of an informational offer? Suppose the florist has a free informational brochure in their marketing that said something like… click here to get “5 Things Every Bride Should Know To Avoid Disaster On Their Wedding Day.”
This would get them a heap of prospects into their email drip campaign. And cause another lift in sales (only 1-3% are ready to buy right now. This offer build trust with the other 97-99%). And this then causes a lift in the referral fees they get from passing their clients to the businesses below them in the event chain.
This is one of the first things I help a client with implementing. It generates a quick lift in monthly revenue for them. And it compounds to substantial annual amounts.
For most small businesses I find additional revenue of $50,000 – $75,000 for them using this one strategy. And this increases their valuation somewhere in the range of $150,00 – $300,000.
Now that’s good business and a good return on their investment with me.