Adding new revenue stream to your business
In this article, we will talk about how you can use joint venture to add new revenue streams to your current business. In our previous articles, we have talk about how joint venture are easy to set up and also how you can use joint venture to penetrate the market effectively and competitively. We have also shared examples on how you can benefit and maximize from excess of inventory, workforce, production capabilities or office and storage space.
To better illustrate this point, I will be using several examples and case studies to enhance and deepen your understanding of the concept of building a new revenue centers through joint ventures.
An alliance between a book author and a training provider.
Let’s say you are a book author on “Time Management For Executives”. All of your current revenue only comes from book sales which can be low unless you are already a well known author or a public figure or have very good marketing distribution. What can you do if you want to increase revenue for yourself? Well the obvious answer to that is to increase your book sales. The limitation is that your revenue will always be limited to the amount of books that you can sell.
No back end sales and no marketing funnel
The real problem here is that you only have one front end product; which is your book and no back end products to sell. You do not have a marketing funnel to run your clients through to maximize your profits and realize the full lifetime value of each customer while at the same time making sure they get the best benefits of your knowledge and skills.
We will cover more on Front End sales and Back End sales in detail in another article. Let me give a brief summary for those who do not know what those are.
Front End sales: The first transaction your clients will have with you.
Back End sales: The subsequent sales you made by continuously marketing to the same clients over and over again. The products on the back-end usually are higher priced items.
It cost you 6 times more to acquire a new customer
In the marketing world, businesses acquire customers and prospects through marketing campaigns. They would spend money on ads for newspaper, TV, radio, magazine, trade publication, running events and promotions or through their sales force. So each prospect that the business converts into a paying customer cost them a certain amount of money known as the acquisition cost.
However, once the prospects have been converted into a paying customer, they are no longer your prospects as they already have a transaction relationship with you. They have now bought from your company before, they have experience your service, and if you do a good job, they will likely remain a customer with you.
As you have their contact details now, you can continuously market products and services that they could be interested in over a long period of time. However, you do not have to spend any more money to acquire this customer anymore. They are already your customer.
So businesses who do not maximize this fact and only look to earn money on the first transaction; the Front End, are not maximizing their business potential. Is it any wonder that many businesses fail within a few years of starting? The motto for these failing businesses are: “Keep finding new customers”. At the same time, they do not realize that they already have a gold mine in the form of customers that have purchased from them before that cost them nothing to market over and over again.
What if you do not have a Back End product to sell?
If by now you realize that you business is likely also suffering from the same malady where you are always stuck on the process of finding new clients and are thinking to maximize your existing customer base, you already have a head start over your competitors.
But what if all you have to sell in your business is just Front-end products and you do not have any products to be sold on the Back-End? That is where joint venture can come in.
Let’s go back to the example above for the book author.
In this example, you the book author only have books to sell and do not have anything else to sell on the back end. As the topic of this book is “Time Management For Executives”, you can look for joint venture partners that have suitable products to be sold on the back end.
You could go to training providers that have 3-5 days training or seminar on applying time management principles that are similar to what you are teaching and sell their courses to your list of book buyers for a share of the profits. The back-end is where most successful businesses make the bulk of their fortune.
In this example, you are probably making RM20-30 for each book sold. It also takes an awful lot of time and effort just to get a few of these books sold.
However, if you are able to do a profit share of, lets say, 50% with the training provider for each of your customer that joins their course which can run anywhere from RM1000 to RM3000 per person. You are making half of that each time your existing book buyer who believe in you, knows your credibility and expertise on the subject as they have read your book, and trust your recommendations, attend one of these seminars or training. You will be making significantly more money on this back end joint venture, wouldn’t you?
Joint Venture for either front end or back end to the bank
Whether your business currently have only Front-End or Back-End product, you can always joint venture with other partners to provide what you are lacking. Here are some of the advantages of doing a joint venture instead of going through the whole process of creating a new product to sell.
- You save time because you can go out immediately and look for a product to put through your sales funnel
- You save money because you do not have to put money into research and development to create a new product and do not have to hire new workforce for that
- You are leveraging on other people’s already proven and successful product or services for your own clients
- You are leveraging on other people’s experience, expertise, credibility, reputation and endorsement
The combinations are unlimited
In this example, we used a book author and a training seminar provider as the joint venture partnership example.
However, the business combination you can do a joint venture with is unlimited and is only limited by the sense of application of the entrepreneur them self. There are money connections everywhere that many people simply miss even if it were sitting right in front of them.
Let’s look at some other examples.
- Say you are an accounting firm and provide accounting and auditing services. You could joint venture with accounting and other financial software sellers and sell their software to your clients and earn a share of the profits for the first time purchase and also the annual renewal and upgrades.
- Say you own a golf equipment store and cater to the high end of the society. You could joint venture with gold clubs to sell their membership, you could partner with luxury car dealership, you could partner with investment firms or even high end real estate property developers and refer your existing customer to them for a share for the sale.
- Let’s say you own an organic vegan shop. You could joint venture with vegan restaurants around the city by referring your customers to their restaurants and you get a share of the profits.
- The combinations are unlimited and works across all types of businesses and industries.
The reason these types of joint venture works is that both you and your joint venture partners are selling to the same target market. Both joint venture partner are leveraging of each other and creating a synergistic relationship so that both parties can serve their clients better by offering products and services that they do not carry while at the same time maximizing profits for themselves.
Keep in mind that if you are not constantly creating new revenue streams by developing new products and services to be sold to your current existing clients, you are likely leaving a lot of money on the table and are not maximizing your profit potential. If that is the case, it is only a matter of time before your competitors who understands these principles take over your market share and increase the hurdle for your business to succeed.
Thank you for reading until the end. Please leave a comment about your thoughts and if you have any joint venture ideas that you would like to explore with us, please leave a comment or get in touch with us via our contact form or via Facebook.
Looking forward to serve you further.