Aaron Hoos

The other day, I was telling someone about a couple of ideas I had for my business. I was excited to share my thoughts with them as they are someone I admire and respect.

But with every idea I mentioned, they responded with a criticism about why it wouldn’t work. After listing a small handful of ideas I had been working on, I gave up. And after our conversation, I felt more than a little down about things. I found myself feeling frustrated and even a little depressed at my entire business!

Then I had a couple of realizations that changed everything:

• I remembered that it’s my business, not theirs. And what’s more, my business has never been stronger. I’m in demand; I’m fully booked; and I’m working with clients I love. I had no reason to feel down about my overall business just because of their negativity.
• I thought about who was giving the criticism: I admire them but not as business owners. They don’t own a business. They aren’t writers. They don’t work in the same target market as I do. In other words, their criticisms weren’t rooted in any kind of accurate assessment of the market.
• I recalled the amount of work I had done to come up with the ideas I had developed. When presenting them to my friend, they were already well-developed ideas I had thought and about researched. But the person providing the feedback was somehow able to dampen my enthusiasm with some well-meaning feedback. However, their feedback was off-the-cuff negative opinions without the amount of thought and research I had put into the ideas already.
• I also thought about this person’s level of investment in my business — zero. It didn’t matter how much work I put into implementation and it didn’t matter whether I succeeded or failed, it would make no financial difference to them.

As I read my realizations above, I have to laugh and wonder “how did I ever let that person get me down?” But the problem is: They weren’t just some random stranger off the street; they are a friend whose opinion I respect in many other areas of my life. So I heard their feedback on my business with the same weight and authority that I hear feedback on other areas in my life. I took their advice too personally and it got me down for a while. I had to intentionally bounce back from it.

Unfortunately, this is not the only time this has happened. I can recall several times throughout the life of my business where I have received business advice from completely unqualified people — people who have never owned a business and could never break free from the comfortable chains of employment. And their advice has almost unequivocally been useless: It was advice that would be neither practical nor profitable; it has been advice that is almost always risk averse. But it was always well-meaning advice from people I respect so it forces me to pause and think.

But it shouldn’t. I need a filter that automatically and instantly filters out any advice from unqualified people.

If you own a business, there’s a good chance that you’re in a similar situation. Maybe you have friends or family who you respect and admire and who are not shy about giving you their opinion. But just because you respect and admire them doesn’t mean they are qualified to give you business advice. Business can be hard even on the best of days. Guard yourself against the well-meaning of advice of people who aren’t afraid of giving you their completely unqualified advice.

Okay, some of you will look at this blog post and nominate it as the boringest blog post of the year. But not me! I love this stuff! Here are 26 Financial Theory (ECON251) classes from Yale, along with a “table of contents” from each video.

FINANCIAL THEORY

ECON251 Financial Theory with John Geanakoplos
Download the course material for this course at Yale’s Open Course site.

Lecture 1: Why Finance?
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Course Introduction
10:16 – Chapter 2. Collateral in the Standard Theory
17:54 – Chapter 3. Leverage in Housing Prices
33:47 – Chapter 4. Examples of Finance
46:13 – Chapter 5. Why Study Finance?
50:13 – Chapter 6. Logistics
58:22 – Chapter 7. A Experiment of the Financial Market

Lecture 2: Utilities Endowments and Equilibrium
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction
07:04 – Chapter 2. Why Model?
13:30 – Chapter 3. History of Markets
24:41 – Chapter 4. Supply and Demand and General Equilibrium
37:59 – Chapter 5. Marginal Utility
45:20 – Chapter 6. Endowments and Equilibrium

Lecture 3: Computer equilibrium
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction
02:48 – Chapter 2. Welfare and Utility in Free Markets
16:52 – Chapter 3. Equilibrium amidst Consumption and Endowments
32:43 – Chapter 4. Anticipation of Prices
52:53 – Chapter 5. Log Utilities and Computer Models of Equilibrium

Lecture 4: Efficiency, Assets and Time
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Is the Free Market Good? A Mathematical Perspective
11:20 – Chapter 2. The Pareto Efficiency and Equilibrium
38:42 – Chapter 3. Fundamental Theorem of Economics
46:27 – Chapter 4. Shortcomings of the Fundamental Theorem
52:39 – Chapter 5. History of Mathematical Economics
01:00:21 – Chapter 6. Elements of Financial Models

Lecture 5: Present Value and the Real Rate of Interest
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Implications of General Equilibrium
03:08 – Chapter 2. Interest Rates and Stock Prices
22:06 – Chapter 3. Defining Financial Equilibrium
33:41 – Chapter 4. Inflation and Arbitrage
43:35 – Chapter 5. Present Value Prices
57:44 – Chapter 6. Real and Nominal Interest Rates

Lecture 6: Irving Fisher’s Impatience Theory of Interest
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. From Financial to General Equilbrium
06:44 – Chapter 2. Applying the Principle of No Arbitrage
23:50 – Chapter 3. The Fundamental Theorem of Asset Pricing
39:25 – Chapter 4. Effects of Technology in Fisher Economy
51:31 – Chapter 5. The Impatience Theory of Interest
01:06:48 – Chapter 6. Conclusion

Lecture 7: Shakespeare’s Merchant of Venice and Collateral, Present Value and the Vocabulary of Finance
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction
01:23 – Chapter 2. Contracts in Merchant of Venice
20:23 – Chapter 3. The Doubling Rule
36:07 – Chapter 4. Coupon Bonds, Annuities, and Perpetuities
54:24 – Chapter 5. Mortgage
59:15 – Chapter 6. Applications of Financial Instruments

Lecture 8: How a Long-Lived Institution Figures an Annual Budget. Yield
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Yale’s Budget Set
03:37 – Chapter 2. Analysis of Yale’s Expenditures and Endowment
31:51 – Chapter 3. Yield to Maturity and Internal Rate of Return
51:52 – Chapter 4. Assessing Performance of Coupon Bond

Lecture 9: Yield Curve Arbitrage
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Defining Yield
09:07 – Chapter 2. Assessing Market Interest Rate from Treasury Bonds
35:46 – Chapter 3. Zero Coupon Bonds and the Principle of Duality
50:31 – Chapter 4. Forward Interest Rate
01:10:05 – Chapter 5. Calculating Prices in the Future and Conclusio

Lecture 10: Dynamic Present Value
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Dynamic Present Values
08:49 – Chapter 2. Marking to Market
39:53 – Chapter 3. Mortgages and Backward Induction
50:42 – Chapter 4. Remaining Balances and Amortization
54:52 – Chapter 5. Weaknesses in the U.S. Social Security System

Lecture 11: Social Security
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction
03:53 – Chapter 2. The Development of the U.S. Social Security System
19:16 – Chapter 3. Economic Imbalances in Social Security
38:48 – Chapter 4. Root Causes of Income Transfer in Social Security
01:05:21 – Chapter 5. Privatization of U.S. Social Securit

Lecture 12: Overlapping Generations Models of the Economy
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction to the Overlapping Generation Model
12:59 – Chapter 2. Financial and General Equilibrium in Social Security
26:37 – Chapter 3. Present Value Analysis of Social Security
59:24 – Chapter 4. Real Rate of Interest and Social Securit

Lecture 13: Demography and Asset Pricing: Will the Stock Market Decline when the Baby Boomers Retire?
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Stationarity and Equilibrium in the Overlapping Generations Model
16:38 – Chapter 2. Evaluating Tobin’s Thoughts on Social Security
35:07 – Chapter 3. Birth Rates and Stock Market Levels
01:02:30 – Chapter 4. Philosophical and Statistical Framework of Uncertainty

Lecture 14: Quantifying Uncertainty and Risk
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Expectation, Variance, and Covariance
19:06 – Chapter 2. Diversification and Risk Exposure
33:54 – Chapter 3. Conditional Expectation
53:39 – Chapter 4. Uncertainty in Interest Rates

Lecture 15: Uncertainty and the Rational Expectations Hypothesis
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. The Rational Expectations Hypothesis
12:18 – Chapter 2. Dependence on Prices in a Certain World
24:42 – Chapter 3. Implications of Uncertain Discount Rates and Hyperbolic Discounting
46:53 – Chapter 4. Uncertainties of Default

Lecture 16: Backward Induction and Optimal Stopping Times
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Calculating Default Probabilities
14:58 – Chapter 2. Relationship Between Defaults and Forward Rates
28:09 – Chapter 3. Zermelo, Chess, and Backward Induction
36:48 – Chapter 4. Optimal Stopping Games and Backward Induction
01:06:47 – Chapter 5. The Optimal Marriage Problem

Lecture 17: Callable Bonds and the Mortgage Prepayment Option
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction to Callable Bonds and Mortgage Options
12:14 – Chapter 2. Assessing Option Value via Backward Induction
42:44 – Chapter 3. Fixed Rate Amortizing Mortgage
57:51 – Chapter 4. How Banks Set Mortgage Rates for Prepayers

Lecture 18: Modeling Mortgage Prepayments and Valuing Mortgages
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Review of Mortgages
03:20 – Chapter 2. Complications of Refinancing Mortgages
19:26 – Chapter 3. Non-contingent Forecasts of Mortgage Value
28:40 – Chapter 4. The Modern Behavior Rationalizing Model of Mortgage Value
54:07 – Chapter 5. Risk in Mortgages and Hedging

Lecture 19: History of the Mortgage Market: A Personal Narrative
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Fannie Mae, Freddie Mac, and the Mortgage Securities Market
17:01 – Chapter 2. Collateralized Mortgage Obligations
22:44 – Chapter 3. Modeling Prepayment Tendencies at Kidder Peabody
35:40 – Chapter 4. The Rise of Ellington Capital Management and the Role of Hedge Funds
52:52 – Chapter 5. The Leverage Cycle and the Subprime Mortgage Market
01:13:51 – Chapter 6. The Credit Default Swap
01:18:36 – Chapter 7. Conclusion

Lecture 20: Dynamic Hedging
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Fundamentals of Hedging
15:38 – Chapter 2. The Principle of Dynamic Hedging
24:26 – Chapter 3. How Does Hedging Generate Profit?
43:48 – Chapter 4. Maintaining Profits from Dynamic Hedging
54:08 – Chapter 5. Dynamic Hedging in the Bond Market
01:10:30 – Chapter 6. Conclusion

Lecture 21: Dynamic Hedging and Average Life
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Review of Dynamic Hedging
09:15 – Chapter 2. Dynamic Hedging as Marking-to-Market
19:55 – Chapter 3. Dynamic Hedging and Prepayment Models in the Market
30:50 – Chapter 4. Appropriate Hedges against Interest Rate Movements
01:05:15 – Chapter 5. Measuring the Average Life of a Bon

Lecture 22: Risk Aversion and the Capital Asset Pricing Theorem
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Risk Aversion
03:35 – Chapter 2. The Bernoulli Explanation of Risk
12:38 – Chapter 3. Foundations of the Capital Asset Pricing Model
22:15 – Chapter 4. Accounting for Risk in Prices and Asset Holdings in General Equilibrium
54:11 – Chapter 5. Implications of Risk in Hedging
01:09:40 – Chapter 6. Diversification in Equilibrium and Conclusio

Lecture 23: The Mutual Fund Theorem and Covariance Pricing Theorems
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. The Mutual Fund Theorem
03:47 – Chapter 2. Covariance Pricing Theorem and Diversification
25:19 – Chapter 3. Deriving Elements of the Capital Asset Pricing Model
40:25 – Chapter 4. Mutual Fund Theorem in Math and Its Significance
52:36 – Chapter 5. The Sharpe Ratio and Independent Risks
01:04:19 – Chapter 6. Price Dependence on Covariance, Not Variance

Lecture 24: Risk, Return, and Social Security
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Testing the Capital Asset Pricing Model
14:08 – Chapter 2. Evaluation of Fund Management Performance Using CAPM
22:30 – Chapter 3. Reassessing Assets within Social Security
53:04 – Chapter 4. Reconciling Democratic and Republican Views on Social Security
59:32 – Chapter 5. Geanakoplos’s Personal Annuitized Average Wage Securities
01:08:48 – Chapter 6. The Black-Scholes Model

Lecture 25:The Leverage Cycle and the Subprime Mortgage Crisis
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Assumptions on Loans in the Subprime Mortgage Market
18:27 – Chapter 2. Market Weaknesses Revealed in the 2007-2009 Financial Crisis
29:00 – Chapter 3. Collateral and Introduction to the Leverage Cycle
38:53 – Chapter 4. Contrasts between the Leverage Cycle and CAPM
43:36 – Chapter 5. Leverage Cycle Theory in Recent Financial History
01:03:55 – Chapter 6. Negative Implications of the Leverage Cycle
01:14:14 – Chapter 7. Conclusion

Lecture 26: Utilities Endowments and Equilibrium
[Click here and the video will open in a new window]
Video contents:
00:00 – Chapter 1. Introduction
02:15 – Chapter 2. Understanding Leverage
13:45 – Chapter 3. Supply and Demand Effects on Interest Rates and Leverage
21:52 – Chapter 4. Impatience and Volatility on Setting Leverage
34:48 – Chapter 5. Bad News, Pessimism, Price Drops, and Leverage Cycle Crashes
48:01 – Chapter 6. Can Leverage Be Monitored?

It’s my birthday today. I’m 37. So here are 37 lessons I’ve learned about business over the years:

1. Do something you love to do. Forget the comfort of a regular paycheck and the wealth-promises of get-rich-quick opportunities. Figure out what you absolutely love to do and find a way to get paid doing it. Do it until you don’t love it anymore.
2. You don’t need to be an expert. You need to do it well and find your groove.
3. It’s okay to aspire to be like someone else but don’t try to be a clone. Combine that aspiration with your own uniqueness to create your own dream of success.
4. Always learn; try new things; range outside of your area of expertise; don’t just connect the dots, find new dots.
5. New entrepreneurs aspire to become successful (i.e. wealthy, famous, busy, whatever) and successful entrepreneurs miss those raw edge-of-the-seat hungry days of starting up.
6. Cash flow, cash flow, cash flow, cash flow, cash flow. Get it. Keep it. Grow it.
7. Become known a problem solver.
8. Become known as a person who gets things done.
9. Smart customers want value and will negotiate with you to get it. The worst customers are the ones who grind you down to get a lower rate. There is a huge difference between the two and the sooner you understand the difference and work ONLY with the smart customers, the sooner your business will become profitable.
10. There are a few core skills everyone should have (over and above whatever you happen to be good at). Those core skills are: Selling, financial literacy, relationship-building/networking, and managing/leadership. If you become an expert in those things, you’ll become an unstoppable train of success.
11. Nothing is permanent. You can change your brand and business on a dime if necessary. Even on the web where everything seems permanent.
12. Test everything. Don’t stick to something because you like it; watch the numbers and be willing to adjust your course based on what the metrics are telling you.
13. Setbacks suck but you can overcome them. They seem huge right now but a few months or years from now, they’ll be a blip… if you remember them at all. (Read my blog post “5 business failures and what I’ve learned from them“).
14. Leverage what you’ve done in the past but don’t dwell on the past. You’ll only get caught up in the cost. Look to the future and remain positive about it.
15. Actively seek out problems you have and eliminate them. It’s short term pain but long term gain.
16. Spend time with people you love. (Yes, that’s a business lesson because those people will keep you balanced when things are going really bad or really good).
17. Give freely. I don’t really believe in karma but there is some kind of weird boomerang effect in the universe that if you give generously, it comes back to you.
18. There is no substitute for discipline and consistency.
19. Find people to partner with. You can’t do it all yourself. There are many different ways this can work so find the way that works for you. (See my blog post on joint ventures).
20. Don’t put up with BS. There’s too much of it in the world. Be gracious and polite but be honest and expect honesty from others.
21. Build systems and models and processes and routines and habits and a sales funnel. This makes your business lean and profitable and gives you an assured path to return to when you stray from it to experiment and innovate.
22. Exercise, eat right, get enough sleep, and smile. Yes, this is a business lesson because these things reduce stress, help you to focus, keep you grounded, and make you a nice person to be around.
23. There is no silver bullet. Just work your ass off. (One of my favorite sayings is relevant here: “Opportunity is missed by most people because it is dressed in overalls and looks like work” – Thomas Edison).
24. Stretch yourself. Try things you’ve never done before and don’t fear mistakes or worry about what other people think of you.
25. Find a few good customers and serve them well. That seems like such a basic thing but some entrepreneurs try to make it more complicated.
26. There’s a psychological dip that happens as you build something (like a project or a blog or even a business). Get to critical mass as quickly as you can.
27. Focus. You get more done when you focus.
28. Be yourself. I wish I knew this one many years ago; I would have taken myself way less seriously.
29. Build a network of people and value them. This is something I think I do well offline but not well enough online… yet.
30. Plan your day and stick to it. You’ll get pulled off course but your plan is there to bring you back. This is another one of those simple lessons that people try to make too complicated.
31. Act. The one key difference between successful entrepreneurs and aspiring entrepreneurs is this simple 3-letter word. Successful entrepreneurs act. (See my blog post: “Are you an action figure?“)
32. You can’t do everything. Gosh, that’s a lesson I need to keep reminding myself every day.
33. Trust your instincts. Your gut is a surprisingly good gauge of what you should and should not do. I have always regretted the times I did not listen to my gut and I have always been glad about the times that I did listen.
34. Get control of your business. Manage your business debt and get rid of poisonous or time-sucking people. (See my blog post on firing your customers).
35. Invest in innovation. Put aside a bit of money from every dollar earned to innovate in your business.
36. Pay attention to the signposts along the way. There are clues and indicators scattered throughout our lives that help us to adjust our course. Find out what the most trusted ones are and listen closely.
37. Do the thing you fear the most early in the day. I’ve been hearing this one over and over lately and I’m wondering if it’s the latest lesson in my life.

Earlier this week I was writing an article about real estate investing and the value of using location-based search and location-based social media for real estate investors.

As I was clicking around to link to relevant sites, I noticed something quite interesting: On the location-based social media side, only Foursquare survives as a strictly location-based social media. Two other sites — Gowalla and Loopt — both shut down in 2012:

• Loopt shut down on March 9th, 2012, after being bought out.
• Gowalla, which was bought by Facebook in Dec 2011, shut down on March 10th, 2012.

In very short order, the race changed. There is a a big marathon of location-based social media and Foursquare, Gowalla, and Loopt were far ahead of the rest, with sites like Facebook and Twitter also offering some aspect of location-based social media as well.

But now Gowalla and Loopt are gone and Foursquare remains as the only real pure-play contender against “consolidated” social media sites like Facebook and Twitter. (And the other location-based social media sites are so far behind right now that they don’t really count).

One pure-play social media site that owns the industry right now. That’s a HUGE opportunity. So what’s going to happen next? All the elements are in place for new competitors to step up and do something exciting in the location-based social media space: Social media is hot, gamification is hot, EVERYONE has a smartphone now and that is driving change in mobile search and mobile marketing.

So I think the location-based social media space is ripe for MORE competitors not fewer.

8 OPPORTUNITIES IN THE LOCATION-BASED SOCIAL MEDIA SPACE

1. Facebook has an opportunity to dominate this space by taking its geotagging up a level, perhaps by combining some of the concepts that Foursquare uses — like recommendations and lists based around the places you are visiting.
2. Twitter has an opportunity to do what Facebook decided not to do — buy a location-based social media site and integrate it. Maybe people can tweet to check-in at locations, and businesses that are ‘registered’ with the location-based side of Twitter can auto-DM deals to the people who have checked in. (Hello! Possible revenue stream, Twitter).
3. It seems to me like Groupon also has an opportunity to extend its reach by offering daily deals to people based on where they are. Groupon can offer more deals and customers who are at a specific location can take advantage of specific relevant deals rather than relying solely on whatever deals are offered that day.
4. Yelp has a similar opportunity as Groupon to invest in a location-based social media site to leverage its database of reviews.
5. What about a time management system that uses location based social media to prompt you to do stuff? (“Hey, you’re at work: Here’s a list of the things you need to do”). Foursquare does this to some degree but it’s not really that cool to check in at work or at home so you miss out on an opportunity to use lists in a meaningful way (and Foursquare’s list system is rudimentary to the point of barely being useful, IMO).
6. Foursquare encourages check-ins and makes it possible for people to see who else is there but it’s not a communication tool like Twitter or Facebook. (You check in on Foursquare and then you text with the people who are there). So there’s an opportunity for existing communication platforms (Facebook and Twitter were mentioned but also texting platforms/smartphones/BBM/etc.) to leverage the location-based aspect to strengthen their service.
7. There’s an opportunity here for the next big location-based social media to own whatever happens after check-in. Ordering? Shopping? Exploring? Working? Socializing? Oh, that reminds me of another idea…
8. Paying. Location-based social media does not need to always be about checking-in. (Yeah, that’s a nice thing but there’s more). Mobile payments are on the horizon and this is an opportunity to help make that happen. So an opportunity to innovate in the location-based social media space might not be to create a new social media site but to find a way to safely integrate mobile payments into a location-based social media so that people who are all together in one place can all spend money at the same time. No, that’s not as weird as it sounds: People split the bills at restaurants all the time; churches take up offering and don’t always need to pass around a plate anymore; timeshares use a group-selling method; seminars can leverage the mass-buying phenomenon to encourage everyone to check-in and buy the “back-of-house” sale, musicians can offer special deals to people who are checked-in at a concert, etc.

When there’s only one pure-play company that is the clear forerunner in an industry, they have a huge target painted on their backs. And, from what I’ve observed, the risk isn’t from businesses that are doing similar things and are farther back in the race. Rather, the risk to those forerunners is from innovators who join the race late and do something surprising and different.

Watch out, Foursquare! Your competition may have disappeared for now but soon you’ll discover some new competitors and they WON’T be the ones you’re expecting.

Joint ventures (JVs) are projects where two or more people/businesses collaborate to make them successful.

They can really be anything — from co-authoring an ebook or co-hosting a seminar to starting a new website or business to collaborating on the development of an idea into a product… the list is endless, and only limited by your creativity.

Joint ventures are a great way to build new businesses or extend current brands and an easy way to fill in gaps that might exist with one entrepreneur’s skillset.

SHOULD YOU DO A JOINT VENTURE?

There was a time when I resisted doing joint ventures. I like running my own business and being my own boss and all that. But when I got to a point in my business where I had achieved the things I wanted to achieve and I was looking for the next mountain to climb, I realized I couldn’t do it on my own. I needed to work with other people.

Although I still run my own business on my own, I like joint ventures for a few reasons:

• I subscribe the theory that 1+1=3. Two (or more) people who collaborate on a vision can actually turn a good idea into an amazing deliverable.
• Joint venture partners have skin in the game and therefore they are more motivated to succeed than if one entrepreneur hired employees to do the work.
• Joint venture partners give each other a good perspective and great networking opportunities.
• Joint ventures are good for primary businesses or supporting/complementary brands.
• Joint ventures take less time to achieve success, helping you to get a business up-and-running-and-profitable sooner.

(I’m sure there are other reasons for liking joint ventures but these are the things that attract me to them).

Since joint ventures can be an added aspect of your existing business (such as co-authoring a book), you can build your existing business with a joint venture; but joint ventures can also be a new and complementary brand or business, so you can grow revenue from a “non-primary” business to supplement your income.

If you are thinking about growing your business or income, consider a joint venture as a way to do it. You don’t have to JV your entire existing business by partnering 50/50 with what you’ve already built. Start small and JV on just one part of your business.

WHAT YOU NEED BEFORE YOU START A JV

Before you approach someone about doing a joint venture, you need to decide a few things:

• Think about what you want to do a joint venture in. (An existing business? A new business? A brand? Some other project?)
• Decide what you want in a joint venture partner. Ideally, they share your vision and work ethic but provide a different skill-set that allows you to work together to complete the project.
• Decide what you hope to get out of the joint venture. Money is often one of the bigger motivators but it’s not the only one. Maybe you want to extend your brand or get more people using your software or something. Knowing this up-front will help you figure out what to do and who to do it with.
• Figure out how much time, money, and effort you are willing to invest in the joint venture. This is huge. I’ve seen a lot of joint ventures collapse because one or both parties miscalculated the commitment required.

FINDING A JV PARTNER

In my opinion, the best joint venture partnerships are based on a pre-existing relationship. I’ve done JVs with people I didn’t know well and they still worked out (for the most part) but the most enriching and successful JVs were the result of a pre-existing relationship. I don’t mean that they were necessarily friends; but we knew each other — we met in a forum or via social media or they were a client.

Social media is a great way to find a JV partner. Twitter, LinkedIn, and a couple of forums I participate in have been the best tools for partnership discovery. Pick a couple of them, participate, and make your purposes known to others.

When you find a potential JV partner, float the idea past them about doing a joint venture. It might go nowhere but the two of you might click and excited collaborate.

STARTING UP THE JOINT VENTURE

As you work with your joint venture partner on start up your JV, here is a list of tips that I’d advise all joint venture partners to remember:

• Keep an open mind. This is a JOINT venture. You might have the initial idea but the other person can bring valuable changes to the idea before the project starts.
• Get creative. A JV doesn’t have to be one business partnering 50% with another business. Find some idea that you both work together on. Start small. Do several smaller JVs first before you take on anything too major.
• Clearly outline the investment of time, money, and effort that each partner is committing to. Remember that there are often up-front AND ongoing costs associated with a joint venture and you should have a plan in place over what these are and when they are.
• Understand how this project fits into each person’s business. If the JV is 100% of one person’s business and 10% of the other person’s business, the second JV partner might SEEM less interested or invested than the first one. This needs to be communicated and resolved before the project starts.
• Plans are huge. Have a plan. For example, create a business plan for your business joint venture, and a marketing plan for your website joint venture, and a publishing timeline for your book or ebook joint venture. Plan in great detail.
• Identify exit strategies. This is huge. Define success and failure and come up with exit strategies for each. Who will own what if the partnership collapses? What happens if one person moves on to other things? How are the rewards shared and when are they shared? What happens if the project becomes super-successful and more people (i.e. employees) need to be added to the mix?
• Legal contracts are valuable but I confess that not all of my joint ventures have legal contracts. The bigger and more complicated ones do. I think legal contracts are valuable but this is also balanced against the cost and risk of the project itself.
• Set up milestone checkpoints for the joint venture partners to pause from the busyness and evaluate how things are going. If both JV partners run other businesses (in my experience, that is frequently the case) then these milestone checkpoints are a good way for everyone to assess the project and get back on the path.

Joint ventures are awesome. They can help you grow your business or provide new streams of income. And they make sense as the next step in a business, especially for small businesses that are not yet ready to hire staff. If you want to grow your business in new and exciting ways this year, start up a joint venture.