Episode 93 | 5 Things You Must Know Before Starting A Joint Venture
[00:00] Rob: If you stick till the end of this episode, Mike and I are going to talking about five things you must know before starting a joint venture. This is Startups for the Rest of Us: Episode 93.
[00:19] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:28] Mike: And I’m Mike.
[00:30] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:35] Mike: So I have a piece of general business advice that I want to share with people and that business advice is never ever start a business with the intent of ever selling anything to the government.
[00:45] Rob: [Laughter]
[00:45] Mike: I’m going through some paperwork with the government because I have to validate who I am and everything else. One of the pieces of information that they’ve asked me for is a Naturalization Certificate which basically says that I’m a Nationalized Citizen of the United States. And I don’t have one because I was born in Japan but I was born on a military-based so it’s considered American soil so I’ve never needed one and they’re asking for it because I don’t know. There’s probably some checkbox there [Laughter] that’s somebody is got to check and there’s no way around it.
[01:14] Rob: So how do you get a Naturalization Certificate?
[01:17] Mike: No idea. [Laughter]
[01:18] Rob: Awesome. Well, good luck with that. I’m sure that won’t be a total waste of your time.
[01:22] Mike: [Laughter] What about you?
[01:26] Rob: Well I’m — I’m going to be a domainer. I’m going to leave all the startup nonsense behind and just buy and sell domains.
[01:32] Mike: Okay. [Laughter]
[01:33] Rob: [Laughter] If there’s a —
[01:34] Mike: What’s that —
[01:34] Rob: Do you think there might be a story behind that? So I’ve owned hundreds of domains over the past twelve years and never have I — wow, I don’t think ever have I been approached with an offer to buy one. And then my wife decided she wanted to start a blog and we registered a domain. We went through like three hours of brainstorming to get, you know, like a brand or she was kind of thinking along some specific lines and so we figured out a domain name to register. And of course, it was taken so I went with the .NET and I registered about two or three others and she wrote a couple of blog posts and within two months, I get an e-mail and this guy says, “Hey, I represent a company, you know,” an unnamed company. “I’m like a third-party and I buy domains and they have an offer for you of $2000 for this domain.”
[02:21] And I mean we registered it like two months ago. And he says, you know, “This isn’t a scam and to figure it out like, you know, Google me here. See me on LinkedIn here,” and he just had all these info and sure enough I looked it up and it was a very — if he was a scam, it was very a legitimately set up. So I wrote back and said, “Yeah but, you know, in order to kind of get back our outlay of time and stuff, we need 4 — 4 grand for it. And sure enough, he replies like three days later with a contract and we went through escrow.com and it closed and —
[02:51.] Mike: Wow. So you made a $4000 from a domain name that you just registered like a couple of months ago.
[02:57] Rob: Exactly.
[02:57] Mike: Wow.
[02:58] Rob: So the profit per — per hour worked on that one was [Laughter] probably my best investment of the year. So of course, my wifes like, “Well that was my domain.” So —
[03:08] Mike: [Laughter]
[03:08] Rob: … I actually gave the money. If only domaining were that easy, huh.
[03:15] Mike: Yeah, I’ve looked at buying domains that I’ve wanted before like singlefounder.com actually was owned by somebody in Ohio before I owned it. It was one of those things where I had I went to go look at the domain and I said, “Oh I should buy that,” and then a couple of days later, somebody had bought it. And you know, it’s just one of those things where you look at and say, “Oh, that’s suspicious.” But I don’t think there was anything malicious but he just happened decided that he was going to buy it and I’ve been looking at it for months and never did anything. So it was kind of my fault. But then he just sat on it for like two or three years and it was about to expire and I use one of the name grabbing services to snatch it before it ended up dropping to the public market. So I got it for I think 60 or $70, something like that.
[03:58] Rob: Oh, very nice. We have also got a few on the drop like that as well. I actually tried this is probably 2003-ish, I tried domaining and I bought a bunch of domains on the drop they call it. And I got most of them from between about 30 bucks and a hundred, hundred fifty a piece, that was my budget at the time and nothing ever really came of it. I think I went up selling one of them for about 350 bucks and maybe broke even on the whole thing but it was a huge time investment. And obviously, when you’re — you just don’t have the best tools. You don’t have the knowledge. You don’t have the budget. There’s — there’s going to be someone who is just better at it than you are and he’s bee doing it longer.
[04:36] So I think domaining from what I’m seeing is kind of dying out because people used to just be able to have a domain and do park at — park ads on it and make back of a 10 bucks a year to pay for the domains, that’s not the case anymore. And so people are having to sell or develop their domains because if you own 10,000 domains at 10 bucks a piece, you talk — or you know, even if it’s 8 bucks a piece, it’s 80 grand a year in domain reg fees and a lot of domainers cannot make that back anymore. And so they — they just can’t afford to keep it going.
[05:04] Mike: It’s one of those things I see are very similar to like the SSL Certificates where if you can kind of get in to market at some level above the ground level, I think that you can make some decent money but you really have to be plugged in somehow because, you know, like network solutions and a few others that have like the higher tier authority. I’ll say they’re — you know, they’re public registrars, they basically get those things first. They get it first crack. So they have their own companies that are built to snatch those domains and then they turn it around and auction them off. So they already plugged in and they’re already making gobs of money and they don’t have to spend a time and effort because it’s all automated form using software. And I think the same thing is true for, you know, SSL certificate registration. If you kind of to get plugged in, upstream a little bit, you get like a root certificate authority. It’s not a lot different. I mean you can definitely make money from it. It’s just a matter of tweaking the system and being plugged in at the right spot.
[05:58] Rob: Right and I think the other bummer about being a domainer is it just kind of sucks because you’re a squatter.
[06:02] Mike: [Laughter]
[06:02] Rob: You know, if you buy a domain, if you own 10,000 domains and you haven’t built them out, that’s just that’s limed to me, you know. What else is going on with you?
[06:10] Mike: So I’m trying to finish up the policy builder for AuditShark and been talking about that for, I don’t know, [Laughter] a couple of months now but it’s kind of coming to the end where everything is almost full circle where can build a policy and you can do everything that you want to build it. The only thing that you can’t do right now is execute it. So I’ve got a contractor working on putting together the code so that you can actually execute the policies themselves and then pull back the results. And once that is done, then I can kind of test the rest of it to make sure everything is working end-to-end and once that’s all squared away, then I could start pushing things out in to the AuditShark cloud service that I have and start using it. So we’ll see how that goes but I’ve got two weeks kind of coming up at the end of August. So right now, it’s August 14th. So I’m working next week and then I took two weeks off to basically just buckle down and focus directly on AuditShark and nothing else. And that would be the two weeks prior to the early release.
[07:05] Rob: Yeah, you have about three weeks left to hit the beta date you had —
[07:08] Mike: Yup.
[07:08] Rob: … mentioned which is September 10th. Are you looking to be on track for that?
[07:11] Mike: Yeah, I think so. I mean I think that those two weeks of me working full time on it is going to help and I’ve got two other contractors who I have basically told flat out, you know, I’ve going to need you guys full time for these two weeks. So I mean we can both basically get six weeks worth of effort done over the course of those two weeks. And I don’t know, it’s just they’re going to be a management piece for me for the most part I think, just making sure that all the pieces were going in at the right places and making sure that nobody’s stepping out on other people’s toes.
[07:38] Rob: Do or do not, there —
[07:39] Mike: Yeah.
[07:39] Rob: … is no think so.
[07:40] Mike: All right, all right.
[07:42] Rob: So hey, I have — I have a micropreneur success story. There is a guy, he’s a micropreneur long-time Academy member and his name is Antonin Hildebrand. He came to MicroConf this year. It was awesome to meet him. He has a tool called TotalFinder and has done extremely well with it. It allowed him to quit his job and he was in the Academy forums during accountability before he launched it and then, you know, realized that he could just launch a small product and see what happened. And it blew up. I mean it did really well. It’s an $18 product and it basically installs on your Macintosh and it brings tabs to your native finder and all kinds of other stuff. It just adds a bunch of functionality. It just pimps it out. So he’s done really well with it and I’d just wanted to highlight that. He was in San Francisco for three months. He’s trying to scope out places where he wants to move to because he’s from the Czech Republic. And so he happen to be there when MicroConf was on and wanted to come down and meet everybody. So hello to Antonin if you’re listening to this one and congratulations.
[08:38] Mike: Very cool. So hey, I’m working on getting the KISSmetrics set up for my Altiris Training website. And I’ve launched it. It’s official. It’s out there and it’s publicly available and I’ve made a couple of sales already so — one guy sent me a request for an invoice so that they can send in a purchase order which is one of those pain in the neck ways of getting payment but you kind of have to when they’re saying that they want to pre-pay for six months and it’s $200 a month. So you know, that’s been going reasonably well. The site doesn’t get a lot of traffic and I knew that it wouldn’t but the price plan is also high enough that it doesn’t need a lot of traffic in order to be able to make a decent sustainable revenue overtime.
[09:16] Rob: Congrats on your first paying customer then, that’s nice.
[09:20] Mike: And — and other news, I have my VA moving all of my transactions from inDinero over to LessAccounting.
[09:25] Rob: Been down for what, six weeks, two months now?
[09:28] Mike: Two months at this point.
[09:29] Rob: This is catastrophic, man. I don’t know what — what they’re doing. It takes them a week or two to respond to e-mails and there has been no blog post, no updates of like we got a system wide or whatever. It sounds like they’re having to one by one troubleshoot each account to fix connectivity issues. And you know what? That sucks for them but they need to let everybody know that that’s what’s going on because at this point, all I’m seeing is just negative feedback and I’m not happy with it either. If it wasn’t such a bear for me to move, I would totally be doing the same thing. And frankly, since you — you said you’re having your VA do it, if everything works out with you, I’ll probably following in your footsteps here.
[10:04] Mike: I got fed up over the weekend. I’m just like this can’t possibly be that much of a problem to reach out to people proactively and say, “Look, you know, there’s this problem.” And they have sent me this troubleshooting stuff and said, “Oh, you know, some Bank of America customers had been reporting this problem and this is what they have turned on.” And I went in and look at my account and I’m like, “Yeah, I don’t have that turned on. So this whole thing that you sent me is not applicable in any way, shape or form.” And I’m just like, okay. So I sent them back an e-mail and they’re like, “Oh, we’ll have somebody look in to it and blah, blah, blah,” nothing. I’m tired of it. So that’s it but like I said before I need that data. So I have to have it moved. There’s not really or anything else I can do. I have no other options.
[10:43] Rob: Right, well that’s — the bummer is not that they’re down. As app owners, you and I know that sometimes you have downtime and you have — you have trouble with your app and we talked about it a few episodes ago but it’s that you have to communicate to people and let them know what’s going on and that can really remedy the kind of the negative feedback that you get and the negative will.
[11:01] Mike: Yeah, I mean for me it’s just it’s not so much the downtime, it’s the length of the downtime and combined with the lack of communication. If it was going up and down like every other day but they said, “Look, this is what’s going on and these are the problems we’re having,” you know, I’ll tolerate it but it just hasn’t worked at all. And it’s hard for me justifying any way, shape or form something that hasn’t work for two months and they’re charging for it and they did refund my money this morning but it took them two months to get to that point where they said, “Oh well, maybe we should refund this guy’s money.”
[11:32] Rob: We’ll see — I’m going to see what happens in maybe at the — I can limp along through the end of the year then at least I can do a clean break from 2012 to 2013 and probably follow you if things are working out at LessAccounting, probably just make the switch as well.
[11:49] Rob: Today, we’re going to be talking about five Things You Must Know Before Starting a Joint Venture. And to start off, I wanted to define what we mean when we say joint venture because what we mean is more of the startup/internet marketing definition which can be one of a number of different things. So some examples of joint ventures are doing a joint mailing meaning that you find someone with like a related business or related app who has customers, you have customers and you each e-mail your own customers and talk about the other product. So typically there’s a product that you already use or you have some confidence in and you e-mail your customers and say, “Hey, you know, I like this product and here’s a discount on it,” or “You know, here’s a recommendation. I want to let you know about it.” So that could be one way to do it.
[12:32] Typically, you don’t want to e-mail the other guy’s list. You know, you don’t want to get his list and e-mail it because you have no relationship with them. You want to e-mail your own list and make the recommendation. Another example of a joint venture is an affiliate deal. Basic affiliate deal just for you sign up for an affiliate program and promote their stuff, that’s kind of a loose joint venture but I’m talking more of when you actually or you have a big affiliate who you talked to and know and you set up specific affiliate promotions with them. Another one is kind of like an ongoing affiliate or ongoing recommendation offer where maybe it’s almost like a co-registration thing where “Hey, you know, you’ve signed up for HitTail. Here’s another product that is a great compliment to HitTail and that that we use and we recommend,” you know, and maybe like a rank tracker or something that just really ties in well with HitTail that functionality we have never built and maybe don’t plan on building but that — that we get a little cut of that and then they get customers out of it and potentially they recommend people back but it’s more of an ongoing arrangement.
[13:27] And then the fourth example that we came up with is like doing an integration with an app. So if you’re going to integrate with FreshBooks or Basecamp, you can either be in their marketplace, you can do a direct integration where everybody who uses the specific app, you know, sees the integration or you can just consume their API. I mean you can even think about, you know, consuming the Twitter API as being a kind of integration. So those are some high level definitions or some examples of what a joint venture might be. There are five rules you must know before starting a joint ventures. So things to think about before you get in to a joint venture with someone. And these are basically adapted from a book that I read called Bathrobe Millionaire and it’s by Jason Yelowitz. And the book is okay. If you’re an internet marketing, it’s kind of his story of what he did. He was doing affiliate marketing and lead gen and different stuff and he learned a bunch of stuff that is actually not that applicable today. It worked for a couple of years. It was arbitrage with AdWords but it was an interesting story but these rules were some of the rules that mentioned. These are good things to know before starting a joint venture. So a little haptic to Jason on this.
[14:33] Rule number one of Things You Must Know before Starting a Joint Venture is that a deal must have enough revenue-potential to be worthwhile. This seems obvious but I cannot tell you how many e-mails, I get multiple e-mails a month from people across all my businesses saying let’s do some type of joint venture, joint mailing integration. That’s a worst one where they want to do an integration. And the first question I always ask is “How many paying customers do you have?” And they can certainly ask that back and I’ll answer it honestly but you have to know how many paying customers these people have or else, you have no idea what the size of the deal is. And I have done full-blown integrations early on, spent 15, 20, 30 hours integrating with someone else’s app to find out that they have 50 paying customers and really know major traffic stream. And so it was a total bust for my time investment.
[15:23] Mike: I think even worse than that is if you don’t ask and it looks like they have an app and they don’t have any paying customers. So I mean [Laughter] if you don’t know —
[15:30] Rob: Yup.
[15:30] Mike: … anything about that the size of that deal, you know, you could be just walking yourself through the paces for something that’s just a complete total waste of time. I think that’s a good question to ask. I think that some people maybe a little put out by it but if you’re the one being approached, then I think that it’s a completely legitimate question to ask and the people shouldn’t be afraid to ask that question. Now, if you’re approaching somebody else, you should also be prepared to share that information to say how many paying customers you do have because chances are good that the other person is kind of want to know that information because they’re going to want to be able to gage whether or not the deal is going to beneficial to them as well.
[16:06] And what you really shouldn’t for is for some sort of an equitable arrangement. I mean if you guys have in the same ballpark number of customers or if there’s at least some percentage from both sides that are going to benefit from it, then it gives you a more accurate portrayal of that information but without a starting point, you just have no idea of what you’re getting in to. This is really about understanding the size of what you’re getting in to.
[16:29] Rob: Yeah, that’s right and I have snippets for a number of products that get a lot of partnership e-mails. DotNetInvoice is one that gets tends to get a lot and the snippet is very tactful. It says, “Hey, thank you for your interest. Look, we really appreciate it. Due to the number of partnership request we get, we have minimum requirements,” and we lay them out. And all of my products, I don’t have such stringent, you know, rules for it but I will be like nice and tactful if someone e-mails and then just say, “Hey, these are some things I have to think about since we, you know, we have to prioritize things. How many paying customers do you have?” And I do get quite a few responses with, “Well, we haven’t launched yet,” or “We just launched and we don’t have any paying customers.” And it’s — that’s kind of a bummer because I’m — I just can’t invest time in to a deal like that because it’s just isn’t a good use of your time at that point. The deal doesn’t have enough revenue-potential to be worth your while.
[17:18] So rule number two is that you should be able to test demand for less than a few hundred dollars or a few hours of work. So the thought here is if you’re going to do a one-time deal and it really is just a joint mailing or something, that’s a few hours of work and you probably not going to test it. So you’re going to go ahead, draft an e-mail and do it. But if you have something like ongoing referrals where you either you’re going to have to tweak your — your website, you’re going to have to change your design or you’re going to have to set up a provisioning API that someone calls back to or you’re going to do a major integration with an app that you’ve never heard of, you really should try a one-time mailing first to figure out if your customer basis are at all in line with each other and if they sent out a mailing to a thousand or 5000 customers and you don’t get any signups, you don’t get anyone signing up, then you know it’s probably not a good fit for you and the time invested, you know, is not going to pan out.
[18:09] Mike: Yeah, I really like this one just because the whole idea behind it is being able to test for just a couple of hundred dollars or some very small amount of money or time. And if it’s going to take you a lot of time and money to figure out whether or not the deal is worth it or there’s enough demand for it, then the return has got to be pretty large and for large return, you should be able to do back-of-the-envelope calculations to figure out what sort of numbers you have to get in order to make that return large enough for you to start investing the time and money to, you know, do a full-blown or full scale test. One of the things that I did for my Altiris Training website was and I actually have kind of a joint venture going on right now where my training videos are going to be bundled with another company who does classroom training. So they’ll do the classroom training that’s a one-week training session and then each of their students is going to get a three-month subscription to my video site. And then we split revenue from any upgrades.
[19:06] They basically provide me with I guess it’s an affiliate commission on the people that they provide the video training too. So I get X dollars for that and then if the customer does any sort of an upgrade, then we split the revenue. And that is definitely something that’s something that’s worth it because I know roughly how many customers they’re getting and I, you know, just have a good idea of what people are looking for. So in cases like that, I mean I don’t even really have to test it very much. I mean just a quick back-of-the-envelope calculation, “This is how much my commission will be,” “This is how many customers per month I’m going to be — be getting through that,” and it’s just very clear that it’s worth it. And that’s really what’s you’re looking for in this type of scenario. You wanted to be able to just quickly figure out whether or not, it’s worth it for you. If it’s going to take you two weeks, three weeks, five weeks to figure it out, probably isn’t worth quite the level of effort just to kind of answer that question.
[19:59] Rob: Right and there are maybe some — some minor exceptions to this rule. I think in most cases this is the deal but if you’re going to integrate with a major player like FreshBooks or someone, you know, HubSpot or 37signals app, you’re not really going to be able to test demand because they’re not going to necessarily do, you know, one-time mailing. You’re just going to have to build the integration and do your best to promote and do your best to get — get them to, hopefully, promote it to their audience as well. And sometimes, you do when you do those big integrations it’s — there is a bit of a gamble but it’s a gamble that if it pays off, you get a huge amount of traffic. And if it doesn’t pay off, you know, you lose out. So…
[20:32] Mike: Right but I think I see that as a little different because in cases like that I mean FreshBooks far out strips most of the sizes of the people, you know. For example our business is FreshBooks is, you know, orders of magnitude — so what you’re basing it off of at that point is your own customer base and looking at that and saying, “Okay. Well how many of my customers are requesting FreshBooks integration,” and then you can do your own percentage and say well, if my own customers, you know, maybe it’s 5 or 20%, say it’s 20% of your customers are asking for it well, you know, how many of the FreshBooks customers are in your target market and how much overlap is there and you’d just kind of do some ballpark estimates there. And I don’t think in cases where you’re integrating with the company like FreshBooks that they really have a lot of involvements. So from their end, they’re not going to care how many paying customers you have because they already have a published API. I think it’s a little bit of different situation.
[21:25] Rob: Rule number three for Things You Must Know Before Starting a Joint Venture is don’t do deals with people, products or companies that you don’t like. There are going to be people, products and companies that come along and they’re going to have a big customer-base and they’re going to be a good match for you and you really going to want to integrate with them but if they do anything shady or even stuff — if it’s not necessarily shady but it’s stuff that you don’t want to be associated with, you don’t want your brand to be associated with, anything like that, you really shouldn’t work with them. You shouldn’t do a joint venture with them. You will — you’ll come back to right at whether it’s they turned out to be shady and they screw you on commissions or they turn out to say things or somehow interact with customers and they make your customers mad and it reflects poorly on your brand.
[22:12] In the end you will regret it. That if you are already using a product and really liking it that you should recommend it. If you don’t know the person who’s running it and don’t really like the way that they’re building their products, supporting their customers and marketing it, then you shouldn’t integrate. And if you don’t know the company, know that they’re ethical and know that they support their customers and keep people happy, then you should do a joint venture with them.
[22:34] Mike: So if people get in to this situation and I agree with everything you said, what should people say to the people who are approaching them because obviously, I think in these types of cases, chances are probably really good that you’re the one who is been approached, what kind of recommendations do you have for somebody who has been approached to say back to them, you know, whether it’s ‘I don’t have time’ or you know, ‘I don’t feel comfortable with this,’ or you know, ‘There’s other priorities first’, what would you recommend as an approach back to that person who’s approaching you?
[23:03] Rob: Well, I mean I have to give two pretty easy outs. One is to say, “I know my audience and I just don’t think this is a good fit,” or you can just say, “This is just not a good fit for us right now, not the direction we’re headed,” you know, maybe just a vague response. You can also say, “This doesn’t fit in to our priorities and this doesn’t fit in to our development priorities. We just don’t have enough staff to handle this right now,” that kind of stuff. I’ve been approached on a HitTail with a couple deals. You know, they’re not bad but they’re just — they — they give me a little bit of a red flag in the back of my mind and so I’ve thought about them for a week or two and realized if I’m thinking about them for this long and hesitant, I really should err on the side of caution. And so I e-mailed them back and just said, “Hey, you know what? This doesn’t fit in to the key right now. Maybe we’ll touch base in the future but — but things just don’t aligning now.”
[23:46] So rule number four is the deal should be non-exclusive and have an easy out clause. And you know, what I mean by this is you shouldn’t sign up for a year-long deal that locks you in to not recommending other products or not integrating with other products or not sending traffic to other products or anything like that. Getting in to exclusive deals is really, it’s kind of a sign of like the old way of doing things of locking people in and to me, it’s a big red flag if someone asks for an exclusive deal and that — and if a deal doesn’t have an easy out clause that you can just cancel right away whether it’s an e-mail or just, you know, sending — sending like a signed document really quickly. Because it shows if you’re not happy with the deal, you should be able to get out of it very quickly. If people want to lock you in, it tends to mean that they are probably not going to make you happy. The deal is probably not going to work for you if they’re trying to keep you in by contract rather than because you want to be part of the deal.
[24:42] Mike: Yeah, I think part of that has to do with having a level of trust as well. I mean in the old days, there was a lot of mistrust between companies about and especially like larger companies where they say, “Well, you know, we don’t want you to do anything with anybody else. We want to lock you in so that, you know, our brand name is on this.” Maybe you’re white labeling some product or something like that. And I just feel like it’s very protectionist and I think the way things have gone over the past 10 or 15 years, especially when it comes to software or the internet, that kind of mentality has really gone by the wayside and I’m very thankful for that but that doesn’t mean that there’s not still companies out there that that’s how they do business.
[25:22] And sometimes it’s just to market there if they’re in or the types of people that they deal with that they say, “Yeah, look this is just the way we do business. This is our standard boilerplate so…” and you know, you kind of just talk to them and say, “Look, this is not agreeable to me. I mean because…” It may very well come from a lawyer who just said, “Oh well, with us are going to be an exclusive deal.” And if you can talk to them and they’re willing to change it, then sure great. You know, go ahead and change it and move on but if they’re not or they provide any sort of pushback then, you know, I think that’s when it’s time to probably just move on.
[25:53] Rob: And our fifth rule you must know before starting a joint venture is that you should know the person you’ll be dealing with and they should be easily accessible. So I’ve actually had a number of partnerships where we set up a deal, everybody agrees on it and then I’m handed off to someone else and that person will either not respond to my e-mails or they will respond weeks later. Their development team doesn’t move on the thing because it’s just been — it’s been downgraded and it’s not as important as the new person is as it was to the person I was talking to. And not being able to get a hold to people during, you know, critical times when you’ve written a bunch of code and you spent a bunch of time on, say integrations or creating an API call for them and then suddenly, they’ve decided that it’s not important to them, really kind of sucks.
[26:39] And so ideally, you will know exactly who you’ll be dealing with. You’ll have a single point person you deal with the whole time. The integration will be important to both of you. The joint venture will be important and you know, the person is easily accessible. You can either get him on the phone, get him on the e-mail and they’re willing to respond to you and you don’t have this big delay. While you’re setting up a joint venture if people are taking a long time to get back to you, that’s a big red flag because if they’re taking a long time to get back to you at that point, they’re probably going to do it once the, you know, the joint venture starts and you’ve essentially wasted a lot of time dealing with them to that point.
[27:11] Mike: I think that last piece is a very important part of this because it gives you a sign of things to come, how they handle themselves during the I’ll call it the negotiation or, you know, putting together this joint venture is going to be very indicative of how things are going to proceed in the future as well. So if it’s a very clean fast and smooth moving forward and they’re very amenable to all these different things, you know, and going back and forth through putting together the joint venture, then chances are really good that the joint venture will turn out well just because of the relationship and you know, it has nothing to do with the customers or the revenue or anything like that but you know, your relationship through the whole thing should do reasonably well. But if they’re not willing to make concessions during just the discussion of your joint venture then chances are really good that they’re probably not going to be very receptive to changes that need to be made kind of after everything has been signed as well.
[28:05] Rob: So those are our five Things You Must Know Before Starting a Joint Venture. To recap, the first one is a deal must have enough revenue-potential to be worthwhile. Number two is you should be able to test demand for less than a few hundred dollars or a few hours of work. Number three is don’t do deals with people, products or companies that you don’t like. Number four, deal should be non-exclusive and have an easy out clause and number five is you should know the person you’ll be dealing with and they should be easily accessible.
[28:34] Rob: We have a listener question from Jeremy Waddams [Phonetic] and he says, “I just finished Lean Startup Machine in San Francisco. If any listeners are considering going, I highly recommend going when it gets to your city. It was a great experience. Within the context of the conference, the mentor’s direct feedback about our progress was absolutely the best part. I know you guys have talked about your mastermind groups and even done some pretty raw accountability exercises on the show. Do you also have mentors that you go to for advice and direction? I notice that Start Small, Stay Small has a lot of accountability content but doesn’t use the word mentor once. On the other hand in the Built to Sell, the mentor is like the deus ex machina that moves the whole story along.” What are your thoughts?
[29:16] Mike: Well I mean part of his question is, you know, do we have mentors that we go to for advice and direction and I talked to a lot of people who have come to MicroConf. You know, obviously, I bounced ideas and stuff off with Rob. I don’t know as I would say that I have somebody who I turn to as kind of an ongoing mentor who, you know, I solely use them for advice or sounding board. I talked to my wife a lot about different things but and it’s more to allow me to talk than anything else. It’s not necessarily because, you know, she’s going to be providing any sort of valuable input, it’s just to kind of let me talk and get things out so that I can, you know, converse with myself a little bit.
[29:53] But I think in terms of just having one mentor, I really don’t have one. I feel like I probably have a lot of mentors that I talk to and ask questions of. But I wouldn’t say that, you know, I point to anyone of them and say, “Oh yeah, they’re — they’re my mentor.” I almost feel like there’s kind of an entire community on the internet of people who I look to for different things like so for Patrick McKenzie, I kind of look to him for insight around A/B testing and some marketing. I mean Hiten Shah, same — same sort of thing, you know, because he’s behind CrazyEgg and KISSmetrics. And for if I’m looking for inspiration I might go to Peldi or Joel Spolsky and kind of get what their thoughts are. I mean not that I know Joel Spolsky or anything but, you know, just from reading his blog and getting ideas from his writing and stuff.
[30:39] I would say that those are the things that I’ve tried to rely on. I don’t necessarily have like a single mentor that I would point to and say, “Hey, they are my mentor.” I mean I certainly have people I’ve looked up to over the years. I wouldn’t say that I have a specific mentor that I could point to in regards to this specific question.
[30:53] Rob: I think I’m in the same boat as you. I like the idea of mentors. It tends to be hard to find a really good mentor and especially the further along you get in the process like once you have a successful business and you’re — I’ll say you’re an intermediate entrepreneur and you’ve launched and you know, you quit your job and so it becomes harder and harder to find people that have a lot to teach you. And when you find those people, they are very, very busy and so unless you can offer them something in return, it does tend to be hard just to find a “mentor”. Finding an advisor for your business, someone who, you know, they can put their name as an advisor on the business or they get some type of equity or some type of arrangements like that, that’s another story. I do see that as a type of mentorship relationship but if, you know, he does asked about us, you know, do we use mentors and I see my — my mastermind group as accountability and there some mentorship going on but it’s between all of us.
[31:48] It’s like a network. It’s not me mentoring the other guys or them mentoring me. But the idea between mastermind group is that you try to look for people that are a little bit ahead of you or a lot ahead of you but that are willing to be in a group with you and that are more advanced so they can offer guidance at least in some areas so you may be a better marketer but they may know sales and product better and another person may know, you know, design and copywriting or something but you can all kind of mentor each other and keep each other accountability in the specific areas.
[32:17] Mike: I think that’s why I don’t actually don’t like about the word mentor is because the word mentor almost seems more like you kind of an apprentice to the person and that’s not necessarily the case. And you you’re better at X than they are and they’re better at Y than you are and so you’re learning from each other versus the idea — for me, mentors really you go the person and you learn from them. You know, they’re more of a teacher for you versus, you know, you’re learning from each other and both growing at the same time.
[32:46] Rob: Right, and I think early on when you’re just getting started, it’s a lot easier to find mentors who are ahead of you and who are willing to help you out and I don’t think that’s a bad thing to do. I think the one-on-one feedback that Jeremy mentions in his question he said it was a direct feedback about the progress was the best part, I think that’s very helpful early on. But I also think you can get that from a mastermind group. I also think you can get that from — from a community. You can go on — we’ve talked about the forums in the Academy. We have an accountability group and people post and people give feedback and they give one on one feedback about progress, all that type of stuff and there are other places to get that online and Academy is not the only one. It’s just the one I’m most familiar with.
[33:22] So I don’t think you directly need a mentor to do that but, you know, certainly if you can find someone to meet with one on one, that’s great. I just found that I think it’s a bit more practical to form a mastermind group because then it’s not just someone mentoring you but you’re actually able to give back and to hopefully, help those people out and support them in some way. So I think we’ve kind of gone around about it here. I think we both believe in mentorship but we may — we might define it differently than — than the question has presented.
[33:51] Mike: If you have a question or comment, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail us at firstname.lastname@example.org. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to this podcast on iTunes by searching for Startups or via RSS at StartupsfortheRestofUs.com where you’ll find a transcript of each episode. Thanks for listening. We’ll see you next time.