The Dangers and Pitfalls of Joint Ventures

Avoid These Risk Factors and Make Sure You're Not Sacrificing Profitability

Affiliate programs and partnerships are becoming an integral part of the modern marketing playbook for a lot of businesses.

Working with other brands and individuals can be a great way to bootstrap an audience, build brand awareness, or diversify and grow your list.

What you may not know is that these partnerships aren’t always everything they promise to be.

You see, at Scalable.co, we intentionally set the bar really high for any potential partnerships. 

Here’s why…

Why Joint Ventures Are Tricky

Affiliates and partnerships are a great leveraging tools to get you off the ground, but if your business is already established, then the cost to benefit analysis looks a little different.

See, partnerships need to be mutually beneficial. And, in our case, there are very few situations where it would actually be worth the time and effort.

When you’re first building up a business, it makes sense to align yourself with another more established brand to build your authority and help get your name out there.

Jeff Walker knows his stuff, and his use of joint ventures really does work for launching.

However…

If you already have a solid list, and a solid relationship built up with your customers, introducing another person/brand to the mix can create a lot of opportunities for misalignment. 

For joint ventures to have a positive impact on your profitability, you have to raise your standards.

So, I’m not saying that partnerships aren’t worth it. I’m just saying that they should be used sparingly and strategically

Here’s why…

7 Joint Venture Pitfalls You Should Avoid

Before you plan out your next joint venture, be sure to review these 7 risk factors you need to know when entering a partnership or joint venture.

Pitfall #1. Double check the revenue share

If you’re looking to work with a formal affiliate marketplace like ClickBank or JVZoo, keep a close eye on those commission rates.

In some cases, rates can get as high as 90%.

That means even if your sales appear to skyrocket, you’re still losing a big chunk of that income paying commission.

These high rates only pay off if the customers convert and you have a proven ascension path.

This is tricky to assume, especially if your goal is to expand your customer base. What works for your core audience may not always work for the new audience.

So, if the results you see from those programs don’t make up for the commission you’re paying, you’re probably better off putting your time and effort into systems you can scale on your own.

Pitfall #2. Don’t Sacrifice the Customer Experience

The affiliate industry is built off the idea that “you scratch my back, I’ll scratch yours.”

Typically, this comes in the form of “recips”, or reciprocal email list swapping. Other common swaps include revenue splits, or lead sharing, depending on the structure of the deal.

Your customers are going to interact with the company you partner with, so when you’re building these deals, make sure there is an equal value match, and a clear product/market fit.

You don’t want to put your customers in a situation where the offer you’re presenting through the J.V. isn’t something they would be interested in.

There’s nothing worse than being peddled a random offer by the company you love, trust, and respect.

Pitfall #3. Don’t Compete with Your Partner

Another tricky aspect of partnering is the potential to compete against each other.

If you aren’t careful, you may end up bidding against each other on paid ads upping the acquisition cost. This can also apply to particularly competitive keywords as well.

In a marketplace with such limited inventory, you don’t want to be outbid by someone you are already paying commission for.

At Scalable, when it comes to working with affiliates, we prohibit the use of paid advertising.

If you’re working closely with a company, make sure you are differentiating the offers and ads each of you are creating.

Twice the work for the same (or fewer) results is not a recipe for profitable joint ventures.

Pitfall #4. Don’t Be Someone’s Steppingstone

It’s important to remember that there are some bad apples out there.

Not everyone has the same goals you have when it comes to joint ventures.

It’s not uncommon for a brand to try and position themselves in a way that would elevate their brand, and sometimes that can come at the expense of your stature in the marketplace.

So, when choosing a partner or affiliate, choose carefully.

You’re not someone’s leg up into a marketplace. If there isn’t mutual benefit, save your money and run in the opposite direction!

Pitfall #5. Don’t Rely on Partnerships for Growth

I’ve said it a few times now, but it’s worth its own section.

Partnerships should be a perk, not a necessity.

If you tie your success to someone else’s effectiveness, you’ll never be able to truly own (and improve) your profitability.

That’s why you need to shift your mindset around partnerships from “essential” to a “perk.”

It’s easy to get addicted to the spikes that come from a product launch but creating that kind of hype isn’t sustainable long term.

Consistent, predictable revenue is essential to breaking through the invisible profit ceiling.

You have to make sure you are looking at the customer lifetime value (CLV) , not just initial customer value (ICV.)

Joint ventures are great stopgaps, but they aren’t a long-term solution to revenue issues. You have to address the root cause.

Pitfall #6. Avoid Giving Away Tons of Free Stuff

We’ve all seen the explosion of free products sent out to affiliates who are “on the PR list.”

But here’s the thing. Free stuff isn’t actually free.

If you have an endless list of affiliates on your PR list, but very few results coming in, you’re throwing money away.

If you are going to give away free products, make sure it’s only to affiliates who are actually bringing in revenue.

Free stuff is great for building relationships, but a friend to everyone is a friend to none, and a generous friend to everyone always ends up broke. 

Pitfall #7. Make Sure You Have a Dedicated Team

Managing joint ventures is a full-time job, so you need full-time employees doing just that.

Make sure it’s someone with great communication skills, work ethic, organization and a backbone of steel.

If you are able to, having the role commission based will help mitigate the risk of bringing in someone who isn’t focused on results.

If you can avoid these issues, you’ll be able to build smart joint ventures without sacrificing profitability.

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