What Are Joint Ventures and How Can They Benefit Your Business?

In the internet marketing world, a joint venture refers to two or more business owners who team up to offer complementary products or services to each other’s customers and share the profits based on a predetermined arrangement.

If that sounds complicated, don’t worry. This example should help to clear things up:

Suppose you own an online store that sells dog-training products. In order to grow your customer base, you approach several obedience schools in your area and offer a trade: If they promote your website in their classes, you’ll offer their customers an exclusive discount and advertise their businesses in your email newsletter. The result is more customers for you and more exposure for the schools — a win-win situation for everyone involved.

This is the beauty of the joint venture.  As long as you carefully design your promotions to protect the interests of all parties, you can establish partnerships that enable everyone involved to grow their businesses. However, as you might expect, any type of arrangement that involves financial risk shared by multiple people should be entered into cautiously.

Here’s how to set up a successful joint venture:

Step 1: Identify potential partners.

If you think that a joint venture might be useful for growing your business, the first step you need to take is to identify potential partners. Weigh your options thoughtfully. Your partners can make the difference between a successful venture and a money-losing one.

Look for partners whose products or services complement your own without competing directly. In the example above, if the seller of dog-training products had approached a business that sold similar items, everyone would stand to lose. There’s no incentive for customers to switch retailers without merchants undercutting one another. Instead, choose partners who offer something new and exciting to your customers. (Think about how business decisions will affect your loyal buyers — and you’ll rarely go wrong.) Approach businesses that are established enough to extend your promotion to a large audience. Partnering with someone who’s just starting out is unlikely to result in a successful promotion.

Step 2: Brainstorm ideas for promotions.

When you approach the potential partners identified in Step 1, do so with a particular promotion in mind. Getting down to business right off the bat will help prevent the back-and-forth that can occur among already busy business owners and stop a deal from going forward.

What types of promotions should you propose? Here are a few common types of joint ventures to get your creative juices flowing:

• Mutual discounts. Business owners elect to offer each other’s customers a similar discount on purchases.
• Exclusive products. You give another business owner’s customers an exclusive product or discount in exchange for promotion to expand the size of your customer base and increase brand recognition.
• Newsletter subscriptions. You offer a free product to another business’s customer base in exchange for newsletter sign-ups. This can be an effective way to increase sales in the long run.

Be creative with this step. You don’t need to stick to these ideas. You know your business better than anyone else, which means that only you know what the most valuable thing you can bring to a joint venture.

However, be fair, too. The best joint ventures allow all parties to profit equally, so think about your proposed promotion in terms of win-win scenarios. Don’t attempt to strong-arm other businesses into agreeing to unfavorable terms that benefit only you. Even if you’re able to take advantage of one merchant, word will get out about your business practices, and you’ll find that your opportunities to participate in future joint ventures will be severely limited.

Step 3: Contact potential partners.

Armed with your list of potential partners and an idea about what type of promotion you’d like to pursue, it’s time to approach people. When you do, keep these things in mind:

• Be respectful. Not all business owners have the time to participate in joint ventures, or they may simply not be interested in participating in one. Remain polite in all communications, because you never know when one of these failed contacts will come back to you to revisit a potential deal in the future.
• Build a relationship first. Most business owners want to do business with people who they already know and trust. So, depending on the size of your joint venture, you may find it helpful to build up your relationships with potential partners before you propose a large-scale cross-promotional effort.
• Clearly state the benefits of your proposal. Most people want to know what’s in it for them when discussing potential joint ventures. Make sure that your introductory message clearly outlines the benefit to both parties.  Let your potential partner know not just how he or she will benefit, but also all the action you plan to take to make the promotion a success.

Step 4: Clearly define your terms.

In an ideal world, every potential partner you contact will agree to go forward with your promotion. But once you have approval from these business owners, don’t just leap forward and start running the deal. Instead, take the time to protect your financial and legal interests by establishing the terms of your joint venture with proper documentation.

Depending on the size and scope of your promotion, it may make sense to seek legal counsel to review the terms of your joint venture before moving forward. This is especially true if you’ll be relying on your partner to distribute funds generated from the joint venture to you. Remember that anyone can seem trustworthy online, so if you’re working with a partner you’ve never met face to face, you owe it to yourself to put the appropriate legal protections in place.

Step 5: Promote your joint venture.

Once you’ve laid the groundwork, it’s time to start promoting your joint venture. Do your best to make it as successful as possible. The better your promotion turns out to be, the more likely it is that other business owners will want to work with you on this type of deal in the future, enabling you to expand your customer base even faster than you thought possible!

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