Things to Consider when Starting a Direct Sales Business

As world renown Gen Y career adviser, Penelope Trunk, has astutely observed, Gen Y wants to be entrepreneurs. We want to be our own bosses. We don’t want to live in cube farms for the rest of our lives, and we want the two things that never seem to go together: time and money.

Instead of working long arduous hours on a startup that may or may not pan out (or pay out), many Gen Y folks – and retirees for that matter – are turning to direct sales. They don’t plan to get rich quick, but it is their safety net or “Plan B” should they lose their job, want to quit their job, or want to supplement their income. And I can tell you from personal experience, there is nothing more rewarding and empowering than owning your own business.

And starting a direct sales company has never been more appealing. Gone are the days when you had to have thousands of dollars of inventory on shelves in your basement. Most companies have websites and make it easy for consultants and customers to order form anywhere that they have an internet connection. Combine that with the low start up costs (some are as low as $10!), and what do you have to lose?

Just a few of the many direct selling companies out there

Just a few of the many direct selling companies out there

For those of you thinking you have no idea what direct sales sales companies are, think again. Does the name Avon, Mary Kay, Herbalife, Body by Vi, or Amway ring a bell? These are some of the big direct sales companies in the US right now. For a full list of DSA (Direct Selling Association) members, go here.

In a direct sales business, a corporation gives you exclusive rights to sell their products, and depending on how much you sell and how many new distributors you train in the business, you are compensated accordingly. They company will manage all of the product, the overhead, the logistics, and the web presence so you don’t have to.

In this post, I just want to give you a few things to think about when selecting the direct sales company you want to be a part of.

1)  Do you like the product? – No matter what anyone tells you, at some point or another you’re going to have to sell products to make money. The easiest way to make sales is to be excited about the products you’re sharing. Have you ever had an awesome purse from Macy’s or a cool watch from Fossil that someone saw, loved, and then purchased for themselves? Because you liked the product and shared how awesome it with your friend, you just “sold” that product for Macy’s or Fossil without them having to do anything. Selling can sometimes be that easy! But never go into a direct sales business thinking you don’t have to sell anything. If you want to make money, you’ll have to at some point.

2) Making Money from Sales – If you’re like me and you are not afraid of the word “sales” – in fact, you might even get excited by hearing the word – you’ll definitely want to look at the different compensation plans out there to make sure you’re making a good profit off of your sales. Some direct sellers will only give you 10% of all of the sales you make, while some companies offer you a 50% commission for all sales. Making sales is the fastest way to make money in a direct sales business. Period. You sell a product at retail price, you subtract the wholesale cost (or the distributor cost for the product), and you keep whatever is left. So, if you sell a bottle of lotion at a retail price of $10, and your cost for the bottle from the company is $6, then your profit is $4 or 40% of your sale.

3) Party Plan or One on Ones – The way in which you make sales can also vary greatly.

Some companies offer what’s called a “party plan“. Most women flock to these types of direct sales companies because 1) There are a ton of potential buyers all in one room at one time 2) The hostess gets free product for having all of her friends over and 3) It’s just fun! Whether it’s playing with jewelry or trying on clothes, throw in some cheese, crackers and wine, and all of a sudden selling never seemed so fun!

Then there’s the “one on one” variety. It’s not that you can’t ever host a party with these products, but normally these companies don’t have a system for giving the hostess free product for having a party, so you’d have to give the host/hostess free products yourself. What’s nice about these companies is that you can do it on your own time (sometimes people can’t make parties) and you can truly consult with people about their needs. It’s more intimate and personal and you can really build a relationship with someone. You also tend to get a lot of repeat business from one on ones where as party plans normally result in sales that night, but not ongoing in the future.

This is not to say that you can’t do parties with the one on one variety, or that you can’t do one on one consults with the party plan company. It just means that distributors are generally supported to do one or the other depending on how the company is structured.

4) Compensation for Team Building – There is a large segment of direct sales companies that are also multilevel marketing companies. These companies compensate you not only for the sales you make, but also for training new distributors on how to start their businesses. As an incentive for you to help the people you “sponsor” succeed, the company may pay you a little extra commission on a monthly basis based on how much these new distributors are selling. So if building a team of consultants and training them sounds like something you’d be interested in, make sure to explore the company’s compensation plan when it comes to coaching consultants you sponsor.

Those are the basics for what to consider when looking at a direct sales company. Other than those main topics, the rest is up to you! Set your goals (long and short term), decide how many hours you’re going to work a week, and get to know your products. If I can do it, so can you.

 

Full Disclosure: I have operated my own direct sales business and I also work in the corporate offices of a global direct sales company. I’ve seen first-hand how these businesses can change people’s lives, and I’ve seen people get frustrated because they don’t have all the skill sets to be successful in this industry. So if you want to give direct sales a try, go for it! You don’t have much to lose, and there is potentially a lot to gain. Just make sure you choose a direct sales company after thoroughly researching the products and the compensation plan.

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3 thoughts on “Things to Consider when Starting a Direct Sales Business

  1. Great blog post! I was in direct sales for several years while running my own business. It was a lot of fun! Much success to you!

    • Thanks Victoria!

      I’m glad you enjoyed the post. Did I miss anything in the article that prospective direct sellers should think about? Feel free to let me know! I’ll be writing a few more posts on direct sales in the coming week, and would love to incorporate any of your thoughts too.

      Best,

      -Marla

      • You didn’t miss a thing, well written! One important factor for anyone considering DS is, love the product, love the company, which you covered. I was with Scentsy and still use the products to this day. I was also top recruiter and top in sales for P.S. ILoveYou greeting cards, they closed the business which was a sad thing.

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