Chapter 3
Choosing the Right Direct Sales Company
IN THIS CHAPTER
Contemplating the benefits of direct selling
Exploring products, profits, and programs
Choosing a start-up company
Debunking the myth of saturation
Being a business owner is something many people dream about — four out of five people say they want to own their own business — yet only about 8 percent ever do. What keeps the other 72 percent from stepping out and becoming entrepreneurs? Most of the time, it’s not even the courage to start or the self-discipline required to succeed that holds people back. In reality, usually the combination of cash outlay for overhead and the length of time before revenue meets and exceeds it prevents most people from owning their own business.
Depending on which field you’re talking about, starting a traditional small business can cost a lot of money. If you want the ease of a franchise, you may be looking at even more money. Of course, one benefit of a franchise is the system the company has in place to support the entrepreneur, which can include everything from purchasing to marketing and selling. These proven methods of operation help create lasting success for entrepreneurs, and make the return on investment (ROI) more likely and more profitable.
This chapter examines why people are attracted to direct sales, and if you are attracted, what you need to know before you select a company.
Recognizing the Allure to Direct Sales
Today, more people than ever are saying they want something different than what they have done in the past. Beginning with Covid and the Great Resignation, where large numbers of employees quit their jobs, in the early 2020s, the workforce has encountered a big disruption. More people than ever are looking to diversify their income and create more flexibility in their lives. In fact, approximately 46 percent of individuals are saying they’re looking for some type of side hustle. Direct sales is appealing to them for the four key reasons I discuss here.
Getting started easily
Direct sales is a low-risk way to start your own business, and it offers many of the same benefits as a franchise. Like franchises, direct sales businesses have proven systems for marketing and selling that they share with their independent representatives. They also help take care of inventory, shipping, product development, and so on.
But they also offer something more — or rather, less. Direct sales allows you to get started for minimal costs. In fact, many starter kits for direct sales businesses will run you less than $200.
The training for representatives is also often low-cost or free. Most direct sales companies provide a simple program that, when followed closely, help you earn commission (which will help you recoup the cost of your kit) and earn additional products to add to your kit within your first three months of business. Most such companies also typically offer free ongoing training in the form of webinars, online training, and both virtual and in-person meetings. Many offer marketing materials such as catalogs, business cards, social media graphics, posters, email campaigns, and so on.
Direct sales companies have a vested interest in you and your success, which is why they provide you with the training, marketing, and other techniques needed to be successful.
Working with an established brand
Starting your own business can take a lot of time to establish yourself in the marketplace. Brand awareness is key because people are more likely to do business with a company whose name or products they recognize. Direct sales gives you the opportunity to have brand awareness starting your first day in business.
Having flexibility
The direct sales model is definitely a powerhouse business model, though it differs in some ways from a traditional retail business model. Both models source products or services to sell to consumers. But a traditional retail business hires salespeople, gives them marketing materials, and tells each salesperson when and where to work. These salespeople receive pay increases and promotions based on their supervisors’ decisions.
Direct sales, on the other hand, is very different in terms of flexibility of time and work. When you start a direct sales business, you’re in business for yourself. You determine how much you want to work and how much you want to get paid. You also determine when you want to work, which gives you the ability to schedule around the needs of your family or in conjunction with another job. You receive pay based on certain benchmarks, such as achieving a certain level of sales or rank advancing within the company.
Providing a community of like-minded individuals
Even though you’re in business for yourself, you aren’t in business by yourself. Your company is with you every step of the way, motivating and training you to achieve success. You also belong to a group of other salespeople who care about similar things that you care about. You can choose a company because their particular values align with yours. You’ll also find people within the community who have common interests or are in a similar place in life as you.
Knowing What to Consider When Choosing a Company
Nowadays, an extra stream of income, the lack of job security at a regular job, and the desire for additional tax breaks make a home-based business very appealing. And there are many great companies out there. You may like several of the product lines and could be well suited for any of them. So how do you choose?
Most people select a direct sales company that they’ve already heard about or had some contact with, generally as a customer. Another way that people become interested in a certain company is that a friend or family member joins and invites them to learn more about the opportunity.
Belief in your product, programs, and profits is important when deciding whether a company is right for you. (I delve deeper into these three Ps in the next section.) You also need to be passionate about what you offer your clients. Many people discover this passion after they’ve sampled a product, become a loyal customer of a company, or hosted an event themselves.
If you’re interested in finding out more about what companies are available to join, aside from the ones you already know, the Direct Selling Association (www.dsa.org) is a great resource. It offers a list of many different companies, organized by category. Many industry groups online provide resources and information.
One of the key ingredients to success is enthusiasm. People are attracted to it — they want to be a part of it. When someone sees that you’re enthusiastic or passionate, it piques their interest. So, showing your enthusiasm is important.
Faking excitement isn’t easy. I’ve heard people say over and over that you need to fake it till you make it. However, people can see through it, and you may not feel as comfortable doing it. I like the statement honesty is the best policy, and I do believe that when people see that you’re sincere and excited about your product, company, or opportunity, then they’ll naturally want to do business with you.
The best company really just depends on you, your likes, and your lifestyle, and finding what fits with that.
Examining the Three Ps of Every Company
You have to consider several factors when choosing which direct selling company you want to align with. In order to make an informed decision, I suggest you look at the three Ps, which I discuss in greater detail here.
Products
You have to like the product that you’re going to represent, especially if it’s your first time in direct selling.
Most people actually join a company because they like the product and believe they could sell it. For others, they may have experienced great results from a product and have a great testimonial and want others to have that same experience. Others may sell a product they need, will use, and want to be able to get at an ongoing discount. For some, it’s the season in their life, what their interests are, and what their circle of friends are into at that time. It might even be that someone believed in them and thought they would be good at doing something different combined with the idea of being able to make some extra income.
Most importantly, you have to like the product.
The direct selling industry has an incredible amount of variety in products and services. In fact, almost every product you can purchase through a retail outlet can be purchased through a direct seller. You can choose nutritional supplements, discount memberships, financial services, clothing, accessories, kitchenware, decor, cosmetics, entertainment, essential oils, food and wine, and much, much more.
I suggest you choose a product you’re passionate about or one that you know many others are passionate about. I wouldn’t worry about “the next big thing” so much as finding a product you believe others will want to purchase. I’ve heard people recommend only selling consumable products, but I know from both experience and anecdotally that products like jewelry draw people who are passionate buyers, even though they haven’t used up their existing supply.
When considering a business, think for a minute: Do you think the product is marketable to a large group of people? From that perspective, it doesn't really matter how much the commission is — if you can’t sell it to anyone, then you won’t have much success.
Ask yourself these questions:
- How marketable is the product?
- Does it appeal to men and women, and to a variety of ages?
- Is it a consumable?
- Will you be able to reservice your clients?
- Is there room for growth?
- Will customers be able to continue to add to the collection?
- Is it at a good price point for the majority of people you will be dealing with?
Although I’ve personally never sold a consumable product, I was still always very successful at getting repeat business because of the emphasis I put on reservicing customers and the relationships that I developed with them. Chapter 17 talks a lot more about these topics.
Another thing to consider is that products that benefit from an explanation or demonstration usually do better being sold through direct sales channels than simply sitting on the shelf in a big box discount store. So if you love a product and know that when you can explain its appeal, it will sell, you may have found a good company for yourself.
Profitability
Profitability is the amount of income you earn, which is generally done through a company’s compensation plan. You’ll want to consider what percentage you will earn based on the sales of products, as well as the income you can earn for rank advancement.
When selecting the right direct selling company for you, keep an eye on profitability. Commissions or profits are important because 80 percent of people join a company with the hopes that they’ll be able to make a nice additional income.
When considering a direct sales company, ask these questions about profitability:
- What is the percentage you’ll receive for personal sales?
- How much will you have to sell personally to get any bonuses?
- What does it take to advance in the compensation plan?
- What does the career plan look like?
- Are you compensated quickly for bringing others into the business?
- Is commission based on percentage of wholesale or retail sales?
- If commissions are based on a volume model, how many points of volume are you getting for each dollar in sales?
- What is an average sale per customer?
- What are the average event sales?
In order to be successful, you need to understand the structure of compensation and work with the program to reach those benchmarks.
Programs
Consider what programs the company has in place for you to be successful. Determine what rewards are offered to you and your hosts and customers.
Find out what programs a company offers. Ask the following questions:
- Does the company offer benefits or incentives to the people that will host an event in their home or online?
- Does the company offer a referral program where hosts are given free product when one of their guests books an event?
- Does the company provide a merchant account so you don’t have to get your own to accept credit and debit card payments?
- Does the company handle sending out all the products?
- Does the company offer a personal website, and what are your ongoing costs, if any (for example, monthly website fee, newsletter subscription fee, processing fee for commission checks or direct deposit, annual renewal fee, monthly minimums, and so on)?
- Does the company offer social media marketing and images (product images, product videos, and so on)?
In addition, you may want to consider the following when deciding which direct selling company to join:
- The kit program’s appeal
- How easy and affordable the program is to join
- Whether the company offers a car program or trip incentives (ask yourself whether you enjoy traveling)
- Whether the company provides a professionally written newsletter that you can send to your customers or a continuous email campaign
Regardless of which direct selling structure you choose, the company will offer several types of programs. First and foremost, you want to choose one with a good training program. Training should include a plan for your first months in business as well as ongoing support.
Most companies have a program that offers additional products to add to your kit while you’re earning your money back. Most of these programs are 90-day programs that have benchmarks at the 30-, 60-, and 90-day marks.
Other programs will recognize you for your efforts, awarding you titles or gifts for achieving sales or recruiting goals. Recruiting means adding representatives to your team. Chapter 18 covers recruiting in detail.
Contemplating Special Considerations for Start-ups
One of the most exciting things you’ll hear in direct selling is: This is a ground-floor opportunity! Joining a company that’s just starting up can be very rewarding — but it also can be risky.
The Direct Selling Association estimates that in any given year there are approximately 1,100 direct selling companies in business in the United States. Even though some direct selling start-ups never achieve the kind of momentum that allows them to build and ultimately sustain a successful business, others go on to become extremely successful companies.
Over the past few years, the direct selling industry has watched as several start-up companies experienced tremendous growth. Many that were started just before the global COVID-19 pandemic have successfully navigated the challenges that came with it and are continuing to grow.
According to Direct Selling News, some of the fastest-growing start-up companies that are less than five years old have topped monthly sales of $1 million.
Here I examine both the pros and cons for you to consider before you make your decision.
Advantages
The primary advantage of selecting a start-up company is that you can be in on the ground floor, which I consider any time during the company’s first five years. I promise you that representatives who joined Mary Kay when it was a fledgling company of four to five years old and then kept working and building her business are very professionally satisfied people. Here are the two primary advantages to selecting a start-up company:
- Ability to introduce a new product and its advantages: People probably haven’t heard of the product yet and might have a stronger curiosity to learn more. This gives you a great chance to create excitement and allow customers to experience something new.
- Ground-floor opportunity: Because this is a new company, it will likely attract others to join you in this new business venture. This allows you to grow a downline quickly. Downline refers to the people in your organization, including your personally enrolled team members and people they have brought into the business. Those people help build your paycheck as you help them build theirs.
Disadvantages
Being part of a start-up company also has its disadvantages. Consider these two drawbacks:
- Time: Getting effective marketing materials in the representatives’ hands, creating a robust website, delivering strong training programs, managing inventory, and shipping takes a lot of time.
- Money: Start-up companies are rarely staffed with a full creative team. They may lack industry expertise as well as corporate expertise, an accounting department, event team, marketing staff, warehouse staff, and so on. That means that you’ll likely face some frustrating delays in areas that are important to the business. Hiring these people costs a lot of money.
Debunking the Myth of Saturation
I’m frequently asked about saturation of a market. Saturation refers to too many people working with the same company at the same time. Some people are always worried about this, and people often ask, “How many representatives are in my area?” For some reason, they seem to believe that their area reaches market saturation when five people are selling in their area.
To those worried about saturation, I ask what the population of their area is. After they tell me, say, 50,000, I quickly do the math for them. Even if you had 17 representatives, then you’d have to do 200 events per month per consultant — a number that is unrealistic and, actually, unattainable.
But even with the number game aside, look at your own circles: friends, family, acquaintances, coworkers, kids’ friends’ parents, doctors, lawyers, real estate agents, instructors, coaches, and so on. Chances are, the majority of these people won’t be selling for the same company that you are. You have a larger reach than you think you do, especially when you factor in their network and circles.
I frequently say that you’ll almost never have to worry about saturation in direct sales. That’s because direct sales companies don’t limit you to specific territories. With the abundance of social media platforms, you can build your business beyond the area in which you live, which allows you to do business almost anywhere at any time.
And not everyone who joins in this business stays. In fact, a third of the people on your team are usually leaving. This isn’t a negative reflection on you or on the industry — it’s simply that they don’t feel it’s a good fit for them, they just don’t enjoy it, or maybe life circumstances are causing them to refocus their attention.
In fact, because your team members’ and prospects’ lives and circumstances are always changing, you’re always going to have people you can sell to or recruit. Every year, a whole new group of people are graduating, buying a home, getting married, having a baby, and so on. People continue to go through new cycles of life, which are opportunities for you. Five years ago, your best friend might not have been interested in purchasing from your home decor business, but with their new home and new circumstances, your products will become some of their favorites.
Establishing relationships with your customers and clients is key. Build strong rapport with your networks and they’ll continue to purchase from you and recommend you to their circles of friends.