Partner UP, Joint Venture SIDEWAYS, and Outsource DOWN

Know what hardly anyone talks about in the IM space?  How to decide when to partner, when to joint venture, and when to outsource to a simple vendor.  I think people don’t talk about this much because there are complex factors involved in making each particular decision.  But I’ve got a simple-though-less-than-perfect rule which is enormously helpful:

PARTNER UP, JV SIDEWAYS, OUTSOURCE DOWN

PARTNER UP:  If I’m going to form a corporation, share equity, and “get in bed with” a partner these days, I want them to be a level or two further along than I am.  Perhaps that means they’ve got an extra zero in their income.  Or maybe they know how to manage dozens, or even hundreds of employees (definitely still not my forte’)…

Partners are people you have a LOT to do with on a regular basis.  You’re going to make a lot of sacrifices for them.  You’re going to butt heads on at least a few significant issues… and, for goodness sake, you’re going to share a checkbook!

So if you’re going to partner, try to partner UPWARDS so the other guy is more likely to bring MORE to the table to compensate for the sacrifice.  Plus, you’re going to pick up some of their personality traits, skills, and core competencies as a result…

Or at minimum you’ll see opportunities to use their resources synergistic-ally…

So they might as well be valuable resources and competencies you WANT in your arsenal! Because even if the partnership doesn’t work out the way you want it to, you’ll still have learned a LOT and accumulated skills and resources you can use going forward.  (The Rocket Clicks PPC agency is one such partnership in my own history, for example)

OUTSOURCE DOWN:  I’m going out of order because this one’s easier to explain.  In almost all cases where someone is below your level, it’s cheaper, less complicated, and less aggravating to buy their products, labor, and other resources than to give them a piece of the pie.  

By definition outsourcing “down” means they haven’t accomplished what you have, so they can’t charge what you can.  When you cut them in–especially on a 50/50 basis–you’re elevating the value of their time and resources to an approximately equal value as yours.

In some cases you might actually want to do this… for example if you want the person to have an exceptionally strong incentive to do the bulk of the work with ultra high quality.   Or perhaps even though they might not have achieved at your level, they’re really the only person you would trust to do the job.

Always ask yourself: “Could I just straight out purchase this product or service with the extra hassle and expense of a JV or equity partner?  If the answer is yes and I still want to JV or PARTNER, do I have a strong enough reason?”  (Skip this question at your own risk.  I know I have!)

JOINT VENTURE SIDEWAYS:  There are definitely a million and one exceptions to this so it’s NOT a hard and fast rule, but ideally, successful joint ventures are executed by two parties at approximately the same level.  I think the reason for this is that it takes a sophisticated person to understand and accept an other-than-50/50 joint venture, but that’s often what would be required to make an unequal level joint venture pay off.

I’ll give you an example of how UNEQUAL level JVs can be trouble…

I’ve previously worked with many experts to record their product and bring it to market.  From their perspective, they feel like 50/50 is a very fair deal.  After all, they spent years developing their expertise, and I’ve spent years learning how to market.  This should be a win-win, shouldn’t it?

Except a seasoned marketer knows it’s NOT a fair deal for several reasons:

  • The marketing party has to record, edit, transcribe, and package the product.  Then they have to write, edit, and publish a sales-letter, program a shopping cart, handle merchant processing, fulfillment, customer service, finance, and more.  Which is to say nothing of the financial risk of advertising…
  • The expert only has to show up prepared to do the recording…

This is why publishing houses, for example, pay authors a pittance for their books unless they’re already super famous.

A more reasonable deal would be an 80/20 split in favor of the marketer/publisher…

Moreover, marketing skills are more valuable than publishing skills.  It’s relatively easy to find another expert… it’s pretty damn hard to find a skilled direct response marketer willing to take on the project.

But… subject matter experts don’t know what we know.  To them, we come across as greedy savages trying to take food out of their children’s mouths.

And because I’m a nice guy and only approach experts I really want to work with, I used to suffer tremendously from offering 50% in these situations.  The problem is, you really box yourself in, because you quickly realize you can’t afford to give the project the time, attention, and money it requires to be successful.  That time, money and attention belongs on a project with a more equitable reward profile.

This is why I’ve recently moved–for the most part–from joint venturing with experts to simply outsourcing to them…

What this looks like is paying a flat fee for their time to help me make the product, and possibly letting them throw a bounce back offer in it so buyers can contact them.   (This also gives me more flexibility to use the product at a discount in upsells and cross sells, include it as a bonus elsewhere, etc. without having to negotiate with a JV partner every time I want to make a change)

But partners at approximately the same level as you have a better understanding of what it takes to make something successful.  They’re less likely to get their feelings hurt and know how to equalize the resources to rewards ratio on both sides.

Take, for example, Yoav Ezer, my JV partner on Joint Venture Fast Track itself.   

Yoav is a sophisticated marketer and former CEO of a seven figure business.  (Which, coincidentally was built on the backbone of one massive JV entirely outside of the Internet Marketing space!)

He knows what it takes to bring a product to market and satisfy the customer.  Yoav understands the value of my list, network, and experience.   And Yoav was willing to compensate with virtually all the work involved in packaging up my (and Terry Dean’s) interviews, tools, and tips into a powerful treatise on EVERGREEN JOINT VENTURES…

Yoav even wrote 80% of the copy with my supervision.

He would tell you otherwise because I’m more “famous” with a following and lots of press logos on all my sites, but I evaluate us as being at approximately the same level.  We’ve both run 7 figure a year businesses, but not yet 8 figure ones.  (I’m planning to get there by 12/31/2016 or die trying!)…

And our JV has gone swimmingly…

For me…

But more importantly for YOU…

Get Joint Venture Fast Track Here.

Anyway, like I said “Partner UP, Joint Venture SIDEWAYS, and Outsource DOWN” isn’t a hard and fast rule.  It’s more like a good INITIAL TEST when you’re considering a deal.  If you’re gonna break it, you should be able to clearly articulate WHY.

Hope that makes sense!

Talk soon,

The Good Dr. Glenn 🙂

Get Joint Venture Fast Track Here.

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