Archive for October, 2011

70 30, 5050, and 30 70 JV Partners… Do Be Careful.

Monday, October 31st, 2011

To find good partners, you always need to test. If you can find one at the gate go, that's great!

Most of the time, you will not successful in finding profitable new partners. You have to plough through 10 partnerships in order to find 1 or 2 you can work well with. Sometimes, a 1st business relationship might require you to take less of the cake… or it may just break even, but trust me, its a good idea to just break even at the start to get something going. Testing the performance of a potential partner and getting something going is worth it.

Once the ice is broken and there is some understanding in how each other works, more business can follow.

Most simple 2 party partnerships are a 30%-70% profit sharing, 50%-50% profit sharing, or a 70%-30% profit sharing.

1. Things that can go wrong in a 30%-70% profit sharing model

In this case, you're taking 30% of the profits. Your JV partner takes 70%. Since the JV partner is taking a larger share, he is required to do more. What can go wrong here, is the partner may decide that since he is doing more, he wants to take 90% or 100% of the profits, especially if the money goes to his bank account 1st. He may wire you a small account then what was agreed, or worst still, not even wire.

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