Considering a Direct Sales Business? What You Should Know Before Starting

8

Famous last words: “If I’d only known then what I know now…”

It’s a story you hear again and again about the direct sales business. You have probably heard the stories of regret where new consultants get railroaded into starting too soon, or not getting the full picture of what it really takes to be successful in direct sales or even coerced into joining so that the leader could earn a trip or incentive.

Actions like that give the direct sales industry a black eye. Frankly, it burns my toast to see enthusiastic consultants who are eager get off to a successful start and make a splash in their new business struggle because they weren’t given all the information. A few important details that perhaps would have prompted them to wait or even decide against a career in direct sales altogether.

Top 5 Things Everyone should know BEFORE Starting a Direct Sales Business

#1: Direct Sales IS a business
Many people join a direct sales company for the product, to have a little “mad money”, or to pay off a few bills with no intention of building a direct selling empire.

There’s nothing wrong with that. In fact, The Direct Selling Alliance (DSA) reported that in 2009, about 20% of the US direct sales force identified themselves as “business builders”, yet only 7.5% of direct sellers worked their business full-time (30 or more hours per week).

While this may be indicative of the ability to earn “full-time pay with part-time hours”, it also indicates a possible disconnect, since the DSA also reports that direct sellers working less than 5 hours a week earn a median of $420 per year, and the median for a direct seller working 40+ hours per week is $34,130.

Be aware that most company promotions and incentives are geared to business builders working at least 20-30 hours weekly. You will not likely achieve most of the top-level recognition without some full-time effort.

If you’re in a company that offers recruiting incentives and bonus compensation, you’ll also be expected to provide training to the people you sponsor. That’s additional time outside your normal selling activities, but many direct sales leaders find that their bonus income exceeds their selling income substantially over time.

#2: Products DON’T sell themselves
Whether you’re doing shows, one-on-one consultations, online marketing, events or expos, at some point, you’ve got to make a transaction. You can’t rely on your friends and family to keep you active with your direct sales company. Have a plan for how you’ll reach new customers and be ready to talk about your product.

In case you’re worried about feeling pushy, remember: it’s not your job to “sell stuff”. It’s your job to help people make affirmative buying decisions that will improve their lives. If you’ve done your job well, hopefully that buying decision is with you.

Practice your sales presentation or your show techniques to improve your ability to earn the sale. Learn about the features and benefits of your best selling products. Be able to share enthusiastically what your company has to offer so that clients will see you as the go-to expert in your product line.

#3: Running a business means additional expenses
I have yet to find a direct sales company that covers all your costs after you purchase the starter kit. New catalog kit additions, inventory (in some instances), supplies, and even taxes are going to reduce the profits you earn from your business.

Certain expenses may be deductible at the end of the tax year, but if you don’t set aside a portion of your profits to cover those expenses, you may not make it to the end of the year without running into cash flow problems.

Be sure to get a clear picture of what you’ll REALLY earn from each sale. Do the math and figure out your gross profit as well as your net profit. A good place to start is 20-30% of your profits for taxes, expenses, and re-investing in business growth.

#4: The only profitability that counts is YOURS
Many sponsors have been trained to give a glowing financial report of the company or even share copies of their own bonus checks to give you an indication of your potential success with the company.

Being a “Debt-free” company doesn’t guarantee the company will stay in business. Successful leaders don’t indicate your level of success in the business. Understand the nature of the business you’re getting involved with.

Established companies have more competition, but are well-known in the industry. Customers will recognize their names more readily than a company new to your area. New companies require more tenacity on the part of a new consultant.

You must be willing to explain and re-explain the nature of your business and work a bit harder to earn the trust of clients that have never heard of you or your product. The upside is that ground floor opportunities can be very lucrative if you have the will to stick it out through the period of anonymity.

If you’re not convinced you can promote an unknown product or company, trust your instincts. A good company will last for many years and a good sponsor will not push you into a contract you’re not ready to sign.

#5: The only thing that matters is YOU
Your sponsor may be one recruit away from a trip to the Caribbean, or a promotion. She may be in desperate need for the extra bonus income to pay her bills. That’s not your problem. Frankly, if you’re within 7 days of the end of the month, it’s more often than not to your advantage to wait until the next month to sign up.

Most companies will tell their consultants the recruiting specials at least a month in advance, so it’s always to your advantage to ask your sponsor what the upcoming promotions are. That way you can make the best possible decision for your situation.

It’s not about what your sponsor needs, and any recruiter worth their salt will treat you respectfully and answer any questions you have before asking you to sign for and invest in your starter kit. If the timing is wrong for you, or it just doesn’t “feel right”, wait. A good opportunity will still be good the following month.

Don’t be lulled by leaders who say “I’ll show you how you can pay this off before your next credit card statement is due if you charge it today.” That tactic is so 1987! It’s always better to start your business without going into debt. A good leader won’t cross the line that violates your values. Period.

Direct sales is not as hard as digging ditches or working in a coal mine, but it does involve effort and it is definitely not an easy, get-rich quick endeavor. You can make a very satisfying living, but your results will very often match your efforts. There are a lot of great leaders in the direct selling industry. There are also a few bad apples spoiling it for everyone else. Arm yourself with knowledge.

In addition to founding #dstips on Twitter, Lisa also publishes the popular and highly recommendedPartyOn! A weekly ezine for direct sales professionals. Get your free business building tips at Home Party Solution.com.

Share.

About Author

Lisa Robbin Young is a performing artist, author, business coach and mentor, founding multiple businesses in her years as an entrepreneur. Lisa brings a sharp, analytical mind to being an entrepreneur in today’s multi-tasking world. Her ability to brainstorm and break problems into their smallest parts earned her a prestigious position in The Governor’s Problem Solving Institute before she started high school. According to her mother, Lisa’s been asking tough questions for over 30 years. A National Merit and National Achievement Scholar, Lisa prides herself on both book smarts and common sense. An award winning writer, speaker, graphic artist and composer, Lisa has recorded two full-length albums, and published numerous articles, poems and literary works. She blends logic and creativity in her approach to life and business. She’s both directed and performed in numerous local theater productions and is currently working on an edu-tainment television series for the web. She also built one of the first ever e-commerce websites in the early 1990′s. And her kitchen sink is still full of dishes from time to time. Lisa is known for her direct, no-nonsense approach to helping entrepreneurs pin-point the obstacles that keep them from being successful. She pulls no punches and isn’t afraid to tell it like it is – a refreshing, disruptive approach to our common thought patterns. Her breakthrough book “Home Party Solution” and the correlating web project, Direct Sales Classroom, provides specific hands-on training for direct sales consultants that want to build a profitable business, instead of an expensive hobby. Her coaching project, Business Action Hero, helps entrepreneurs find elegantly simple solutions to be more profitable in life and business. Lisa’s new book, The Secret Watch, is expected to be released early 2012.

8 Comments

  1. Thanks, Lee. I’ve been in the shoes of a newbie direct seller a few times in my career, and I know that if I had not been razzle-dazzled by the “potential” of the biz, I might have made different choices in my early career. I’m not trying to bash leaders, though. I work with so many wonderful leaders that ARE sharing these facts with their recruits – and yep, sometimes it means turning people away. If you’re building a business, that’s part and parcel to the role of being a leader. 🙂

  2. These are excellent tips. I especially like points #2 and #3. I remember years ago a few friends got into Direct Sales and it would have helped them to have a better plan than relying on friends to host parties. Eventually, you run out of friends! #3 is right on the button: no matter what business you’re starting, there’s a good chance it will cost you more than you expect. 🙂

  3. I can relate and agree with you 100%! I don’t think you are bashing at all – this is the plain truth! After a year of studying, watching and learning about a new DS company, I am excited to finally come across a Founder that teachers everyone these powerful lessons!

  4. Cathy,

    Yes. These seem to be two of the biggest errors of people getting into the business. You wouldn’t start a coffee shop and expect your friends and family to keep you in business, why would you launch a direct sales business that way?

  5. Thanks. I know that not everyone relates, and there are those that can take this concept too personally. So glad you’ve found someone that gets it and is willing to be honest with you. YAY!

Leave A Reply