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0:31 – What is Joint Venture?
2:02 – Who can you joint venture with?
5:51 – Joint ventures in advertising
6:25 – How to set up joint venture relationships in advertising
7:33 – Joint venture and client value
9:07 – Paying for results vs. paying for advertising
10:02 – Endorse mailing
11:43 – Emailing
12:28 – Insert-type approach
13:19 – Business cards
14:13 – How to structure these deals
16:27 – Tip of the week
Hello everybody. Welcome to the hvacbusinessgrowth.com podcast. I’m your host, Nick Bielawski. We have a great episode lined up for you today. The topic for today’s podcast is Joint Ventures.
Joint venture is really a great way to exponentially increase your business. So, if you’re not doing joint ventures right now, I think it’s something that you should look into. It’s really an overlooked way of marketing your business. Most people just tend to stick to the norm: radio, newspapers or internet advertising. They don’t really look in their own backyard or look into the relationships that they actually got with other people.
I think joint ventures are great if you’re starting out. So if you’re new in the business or you’re trying to do something new with your business – you might be re-launching or something like that or even if you’re a little bit short of funds to do the advertising that you really want to do or maybe you don’t have the budget or your cash flow isn’t good then joint ventures are a fantastic way to really generate some traffic and interest into your business.
So basically, with joint ventures, you need to find a partner who has already built up the goodwill with your target customers and then what you will do is just leverage that particular partnership. Most people think that joint ventures are an eye-for-an-eye type of thing where, it’s a you-can-use-my-list-if-I-can-use-yours relationship. That doesn’t have to be that way at all. We’re going to go into a couple of different ways that you can structure your deals later on.
Let’s start with a little bit of a brainstorming session. If you’re doing residential heating and cooling, let’s have a think about the types of people that you can joint venture with. Builders are going to be a fantastic person or company that you can joint venture with. Obviously builders are going to be creating new homes and new structures and those types of things.
If something isn’t built, it actually doesn’t have a heating and cooling system in it which is what you’re going to sell. So, if you can create a relationship with a builder or many builders, which should be ideal, then you can get your heating and cooling systems into the buildings that they’re actually creating. So, you can leverage off the marketing that they’re actually doing which I think is actually fantastic. Obviously, you’re going to market yourself for you to get your own installations and services done.
But if you can leverage off the advertising of somebody else, that’s more fire power for you.
The same goes for property developers as well. Normally, property developers might do complexes or they might do 4 townhouses or 8 townhouses or whatever the developments needs. They might be developing a big apartment block. If you can have a good quality relationship with that developer and joint venture with them, then that’s a great chunk of business that’s going to be coming in.
If you could get the contracts for a particular high rise apartment, that might be more than enough business for your company for the entire year. So, there’s a lot of firepower in doing joint ventures.
On a smaller scale, plumbers are obviously really good. Some plumbers are actually qualified, as you might well know, to service and install heating and cooling systems. So, you can actually leverage their experience. Some plumbers, particularly in the residential market, are doing a job every 2 hours on every given day and they see a lot of stuff. So you might be able to be a partner of that particular plumbing business that could recommend you to that residence. So that’s almost like a referral but it depends on how you structure your deal.
So let’s talk about commercial joint ventures here. If you’re doing big commercial heating and cooling systems or contracts, then it’s a good idea to try and build relationships with the people you’re doing it with. So again it might be the developers or the builders or it might actually be the investment group.
In Australia, there’s quite a big group called Westfield that does a lot of major shopping complexes. If you’re into the contract side of things and if your business could actually land one of those big shopping center complexes, then that would give you enough business for quite a while; you keep a lot of people employed and you bring in a lot of profit. Trying to build relationships with these types of business is absolutely essential in supplying the joint venture card correctly.
Also, commercial builders might be building warehouses as well. They might build several warehouses a year. It might not be as big a job as doing a large multi-storey shopping center. Getting a warehouse job, if could actually do the job—if you have the resources, the tools and the staff to do it, you wouldn’t knock a job like that. So, building a relationship with these types of people is actually essential to getting this type of business, I think.
Another way that you can use joint ventures is in your advertising. Joint venture for advertising is fantastic if you’re short on initial funds. Advertising as you probably know, in your business, is really expensive. Radio can cost tens of thousands of dollars. Billboards might cost up to a hundred thousand dollars. Running an ad in your major metropolitan newspaper might be close to 6 figures if want to do it on a weekend and if you want to get a good quality ad. Magazines are super expensive as well.
So you can set up some major joint venture relationships where what you basically say is that instead of paying upfront for the particular advertising, you negotiate and there are a lot of ways that you can do this.
You can change your terms so they are in arrears. What that basically means is this: say a particular radio ad will cost you ten thousand dollars, instead of paying the ten thousand dollars upfront, you might ask to have 30 days to pay for the advertising after it was ran. What that does is the radio company invests in your business, obviously a little bit of goodwill is involved there, and they’re happy that you’ll pay them after the profit has come in. That’s a good way of doing it but some people don’t like you trying to mess with the terms and conditions of their payment structure. You may offer a percentage of your profit or you might offer a particular dollar value per customer.
In some of the more recent episodes, I think it might be in one of the direct marketing podcasts that we did, we spoke about knowing what your client value is actually worth. So, if the client is worth $800 a profit to your business, how much of that are you willing to pay out to get that customer? You might be willing to pay $400 or $100 or whatever it is to get the customer.
So if you know that you can negotiate with the radio company, in this example, you say “We’re not going to pay you the ten thousand dollar rate here but what we are going to do is give you X amount of dollars per customer generated.”
That’s going to work on companies that are really open to generating alternative sources of income. The thing about trying to sell on radio or billboard spots is you’re actually limited in a way in terms of how much stuff you’ve got. There are only so many minutes of ads that you can sell at a certain price point and your income is quite limited. Whereas in this case here, if you’re offering a percentage of profit or a per dollar per customer type of arrangement then it’s literally limitless—the amount of profit that both of you can make here (your heating and cooling business and the advertising company you’re dealing with). So it doesn’t hurt to ask the question and it’s something that you should look into.
Ideally with that, you should have the philosophy of paying for results instead of paying for advertising. The only problem is in the digital day and age, it doesn’t work so well. You can’t walk up to Google and ask to pay only after you get results on your Google AdWords or your Facebook campaigns or all the other digital types of traffic sources out there.
A lot of the big agencies or the good quality search marketing companies won’t negotiate this sort of terms for you as well. It tends to work on a lot of the more, I guess you could say, old school types of advertising medium such as radio, billboards, newspapers and magazines. These mediums are quite expensive so if you can negotiate some of your advertising cost and work it out like a joint venture, that can actually work quite well.
Some of the joint venture techniques that, I feel, actually work outside of advertising side of things is endorsing mailing.
If you haven’t heard of endorse mailing, this is what it is: you find a joint venture partner who has a list of prospects, list of customers, VIPs or as long as they have a list of people. You basically get them to send a letter. In the letter, they actually endorse you. You might get a letter from your local plumber or you set it up that you get a letter created with your local plumber and they send the letter out to all of the mailing lists that they’ve got or all of the customers they’ve done business with. They basically outline how they’ve created this relationship with you and they think you’re fantastic. And if they have heating and cooling issues in the future, the local plumber highly recommends that they use your business. You create an offer or you put an offer in the letter. It might be a discount or a voucher for something that can be used within a certain period of time.
There are a lot of ways that you can actually do it but the endorse mailing is actually fantastic because what you’re doing is leveraging the relationship that has already been created.
You’ve probably heard this saying before, “It doesn’t matter what you say about yourself; it’s what other people say about you.” In this case here, somebody else is actually endorsing the work that you do and that adds to your credibility; endorse mails work fantastically well. This is something that you should really look at.
A step down from endorse mailing is endorse emailing. They might send an endorsed email. This works quite well although email open rates are declining and people may say that email is a little bit spammy or a simple way of doing things but you can still do this. You can also get somebody else’s raw email list and borrow that list often. Again, it’s not quite as good. It can actually come through as spam because, in a sense, they haven’t exactly given permission for you to email them directly but you’re just borrowing their information from somebody else. So that can be a bit tricky.
Another thing that I think works quite well is using an insert-type of approach. Basically if one of your joint venture partners does regular mail-outs, you can actually offer to pay for their mails— you pay for their postage, their envelopes and their stamps—if you can put an advertisement, a voucher or a letter or something like that inside of the ad that they’re doing. You’ll find that most people will go for this because they don’t have to pay to get their initial marketing message out there.
A word of caution is this: you still need to know what your average dollar per customer value is or your lifetime customer value. That’s really important when you’re doing something like this.
Another thing that you can do from a joint venture perspective is really simple—just take a lot of business cards around to some potential partners. Take a stack of business cards around and if they’re in their business and if they’re having a conversation with somebody and if it might come up that your heating and cooling business is the ideal solution, then you ask if they can recommend you. You might set that up as a free recommendation; it means they might not get anything out of it. You may set it up as an affiliate-type of arrangement where you might give them a percentage of a finder’s fee or something like that for recommending your business.
There’s a bit of a gray line between, in this case, a joint venture and a referral but I think you get the idea. So, it’s very much leveraging the relationships that other people have.
So how do we structure these deals?
So I’ve already come up with a few ideas before. You can obviously do a percentage of profit. That can work quite well. You can do a percentage of sales.
The great thing about the percentage of sale is the way you can leverage and sell your business is virtually unlimited because you’re getting, let’s say, $2 of profit and you’re only giving $1 away. That scales very easily and given the opportunity somebody would always pay $1 to get $2 back. A kid would even consider doing that. It’s something pretty simple and easy to work out.
The other way that we could structure this deal is through a list for a list. So, if somebody in a similar market or another joint venture partner has a list, you can basically email their list and in return they can do the same to yours as well.
The thing is, with a heating and cooling type of situation, particularly if you’re in the residential market, they may be interested in quite a number of other things apart from your heating and cooling services. These same people who have just moved into, say, a new home and they have a heating and cooling system that you’ve installed, they may also be interested in televisions, blue ray DVD players or computers and those sorts of things. So, you can actually make some money off the list and the advertising that you’ve done as well. You’re making the advertising dollars that you’ve spent actually go just a little bit further by making some more money off the backend.
In the online marketing world, this is actually a legitimate business. Most people spend money to generate a large list of people and they actually make more money renting out their list of people to other businesses and what they do is actually sell their own products and services. This backend, trial side of marketing, if you like it, can actually be very profitable if you work it out properly.
So now it’s time for another hvacbusinessgrowth.com tip of the week.
This week’s tip of the week is an action tip. What I want you to do depend on whether you’re on the residential or the commercial type of market. What I want you to do is approach at least 1 person this week about a joint venture. So, if you’re a residential HVAC company, I want you to go and talk to a builder. Pick up a phone and talk to a builder or a developer about setting up some joint venture relationship or partnership where you can leverage the relationships or partnerships that they have with people. I think it’s going to be fantastic if you can do that.
If you’re a commercial HVAC business, again, pick up the phone and speak to somebody that has the type of customers or clients that you’re looking for. It’s really a cheap way of marketing your business and getting your business message in front of your potential customers.
So again, get on the internet and go to the Yellow Pages, go through your business cards and contact at least 1 person this week about sorting out a joint venture for your businesses.
Okay so that’s all we’ve got time for today on the HVAC Business Growth podcast. I’m your host Nick Bielawski. Thanks for listening and I’ll see you next time.