According to the Direct Sales Association, more than 20 million Americans are involved in direct selling in the United States and in 2015, direct selling generated more than $36 billion in retail sales. As you can see, starting a direct sales business is a very appealing option for many women who want to have control of their own hours, work from their home, have low start-up costs, and unlimited earning potential.
I’m here to help you make an informed and educated decision on the types of things you should be thinking about and researching before choosing a direct sales company to represent. As part of my role as a coach to family-centered entrepreneurs, I work with a great deal of direct sales consultants. Sometimes I work with women in the beginning stages of wanting to choose the right company and a lot of times I work with women who want coaching for their own downline. Other times I work with women who want to expand the opportunities available within the direct sales company they have already decided to represent.
What started as a ‘quick’ Facebook comment in a thread has now become a fairly comprehensive look at what it takes to properly vet a direct sales opportunity. This article covers:
- First Things First
- Let’s Talk Money
- Sales Opportunities
- Support Structure
- Other Benefits
- Picking a Product
- You Can’t Take It With You
First Things First
Representing a direct sales company requires you to SELL. Let me repeat that, SELL. SELL SELL SELL. If you think “you could never sell something” or “I’m no good at selling” or “my friends will disown me if I sell to them” you have a decision to make. Reframe your outlook or choose another line of business. Being a salesperson isn’t all used-car-slime as it used to be. Every business needs to sell something to stay in business. If you don’t, it’s just a hobby.
Good salespeople bring the right product to the right people at the right time.
Great salespeople do all that AND lead others to do the same.
Just know that in the end, you will be selling.
Let’s Talk Money
How much money can you afford to invest in the first year to start/grow your business?
The plain and simple fact is that ALL businesses cost money to start & market. Starting a direct sales business is no different. More importantly, how much money you afford to invest and never get back? All businesses need to answer this question, not just direct sales.
A good number of direct sales companies have smartly priced ‘starter kits’ for new consultants/representatives to purchase. Many of them require the purchase – or a minimum dollar purchase – to start as a commissioned representative. Customers don’t want to make purchases out of a catalog and direct sales companies want their products showcased in person (unless your shopping Amazon.) This is no different than a retail store having samples to see or try before reaching behind the counter for inventory to sell. (The benefit of direct sales is that generally, you do not have inventory on hand, although some choose to.)
You will also need to invest money into marketing. This could be a table at a local business fair, flyers, logo wear, business cards, samples, consumables, advertising, or even business networking memberships.
Have you thought about how much money you would like to earn?
Chances are you wouldn’t show up to a job not knowing what you will be earning, nor would you accept a job that didn’t provide the income you need for your needs and wants (extraneous circumstances aside.) You should go into building a direct sales business knowing not only how much money you want to make but have a plan on how to get there.
Note: Direct sales is not a get-rich-quick scheme (or opportunity.) Please know that building any business does not a guarantee of making money. That is what a job is for – show up, do work, get paid, repeat. If you are in NEED of immediate money to pay bills or feed your kids, a traditional job is the smarter choice. Once you get on your feet you can think about the ‘side hustle’ of direct sales.
Have you “run the numbers” to figure out how much you will need to sell to earn what you want/need?
This is the part that honestly breaks my heart. Women who turn out to be pretty dang amazing at direct sales and/or recruiting and yet have very little money to show for it. Lots of product, lots of new friends, but very little money. When looking at compensation plans across direct sales companies, be sure to consider if what you are selling is a one-and-done product (such as cookware, jewelry, kitchen storage, or clothing) or a consumable (such as food, beauty, nutrition, hair care, essential oils, etc.) Some direct sales companies have auto-ship programs which help guarantee a certain level of sales (read: income). In the end it all adds up.
In a nutshell: Consumable auto-ship programs require the least amount of new customers to make an income. The danger is something called ‘churn’ – when customers stop being customers. Products that customers only need to buy very infrequently – such as cookware or kitchen storage – require you to reach a much larger of people to purchase from you to sustain income.
Is your area saturated with other distributors/representatives?
When ‘everyone’ is selling, ‘no one’ is buying – at least that is the theory. Great salespeople find sales everywhere, but what if you aren’t great (yet)? It can be easier to sell when the area you live in (or your online circle of friends) has not been over-exposed to a particular product. As much as I love the products of a certain kitchen gear home party company, I think I own nearly every item they make because I’ve been to so many parties. Of course, there is a fine line between over-saturation and market awareness.
My go-to tip for taking the pulse of an area for direct sales saturation: Check out the Facebook or Nextdoor group for local moms. What company do you see over and over? What company or types of products are people looking for? You now have a great place to start your research. Don’t ever pick a business because one or two people showed interest. That isn’t enough to sustain a business!
Next, check to see what your restrictions are for selling online via social media. Being able to sell via social media channels (Facebook, Instagram, Twitter – those are the three biggies in the order I see success) can be vital for people that either live in sparsely populated areas or folks like me who have limited in-person social circles (hey, I just moved to San Antonio!)
Some direct sales and/or franchises are specifically set up to be sold via Facebook. I’ve seen “pearl parties” sell like mad using Facebook Live (it’s not my ‘thing’ personally.) I’ve seen children’s clothing and women’s leggings host Facebook Live ‘shows’ very similar to QVC. It can be insane. To me it feels like the early days of eBay when people felt they “won” because they were the highest bidder on an item. People tell me it scratches the gambling itch. To each their own!
Do you currently have a large/strong on/off-line network to prospect to?
One of the pillars of direct sales is to start selling to your friends and family first. First, you need to be super comfortable with the idea of ‘pitching’ these people and not burn bridges. Family before business – ALWAYS. In order to do that you need to 100% stand behind the product you are selling – read my article “Would You Pay Someone for Your Own Product?” If the answer is NO, how can you in good conscious recommend (sell) it to those closest to you?
Once you have “sold through” F&F (friends and family), do you have enough of a larger social connection to keep your business going? It has been my experience over the last 20+ years that you will gain very few repeat customers or recruits from your first-level connections of F&F. Unscientifically, I’d say 96% of direct sales representatives drop off at this point.
Church, day job, mom’s groups, book club, PTA – consider it all. My experience shows if you can successfully reach a third level connection, you can sustain a direct sales business.
Have you educated yourself on the different business framework models?
Below are a few definitions based on my 20+ years of work within the greater industry. As a standard in my article, I refer to all the various frameworks as “direct selling companies,” just know they can fall into any range of structures.
This is by no means all-inclusive or as detailed as it should be, but it is a starting point for your research. Direct sales company is structured to operate within frameworks like the ones shown below. Be sure to understand what the Company expects of you before choosing a product and company to represent. (For more definitions, read this article.)
- MLM: Multi-level marketing, sometimes referred to as ‘network marketing,’ ‘word-of-mouth marketing’ or ‘referral marketing.’ What this means is that you earn a small percentage of the customer sales amount for those recruited ‘under’ you. Each company has unique criteria and guidelines for the levels (generations) you can be compensated for. Amway is considered the pioneer in this space. (Please note that Wikipedia refers to it as ‘pyramid selling’ which a LOT of folks would automatically assume to be ‘pyramid scheme.’ It is not the same thing.)
- Party Plan: Any direct-to-customer sales that are typically constructed in a way that requires the salesperson to visit the location (usually a home) of the host to conduct the sales pitch and product demonstration. The host, in turn, invites their friends and family and typically earns credits for the product for free based on the attendee’s sales. Tupperware and Avon are probably the two most widely recognized names in this space.
- Direct Sales/Selling: Selling products directly to a person at a time. This stands in direct opposition to Party Sales, although both selling tactics are typically used in tandem by a salesperson. The Direct Selling Association is the governing body for this type (and many other) selling frameworks. Just because a company isn’t listed as a member does not mean they are a ‘bad’ company (criteria for membership is strict and takes awhile to earn and only the most worthy companies make the cut,) it just means you need to do further research.
- Pyramid Scheme: Also referred to as a Ponzi scheme. This includes any form of direct selling or MLM that does not sell any meaningful amount of product but rather relies solely on making money from recruiting other people and/or requiring your downline to prepurchase massive amounts of inventory, or a required amount of inventory to stay an ‘active’ salesperson. The DSA has an excellent one-sheet to help identify pyramid scheme operations.
A note on schemes: Straight up not cool or LEGAL. Many (M-A-N-Y) people assume that all forms of direct selling are a pyramid scheme. Please know this is simply not true. Properly structured direct sales companies are ethical and legal in their framework and compensation. Sadly there are always people within a structure that behave unethically or even illegally within the framework of a direct sales company. This is usually not reflective of the company or products.
Note: I have owned a retail store. I paid a LOT to purchase inventory (over $100,000,) pay employees, rent, electric, fixtures, marketing, insurances, and shrinkage (shoplifting.) Direct sales representatives do not have this overhead. The companies I purchased inventory from were compensated salespeople who made a commission as did their boss on all of my invoices. This part is not much different than direct sales.
Do you have family support to get started and become successful?
Ding ding ding ding! This is a big part of what I coach on – how to make sure you have the support of those around you while you are trying to build a business. After all, you are a family-centered entrepreneur! Let’s look at these two very real scenarios (they come paraphrased directly from my coaching clients):
- Your husband doesn’t want you to waste ‘household’ money on starting a business.
- Your mom keeps buying “questionable ingredients” essential oils from the kiosk at the mall and then complains of headaches to anyone within earshot and falsely equivalates that product to yours.
- Your girlfriend talks your lectures you about “all things pyramid scheme” and the one time she bought an overpriced baking mix at a home party and she was offered a chance to become a representative.
- Your husband cooks/does dishes/bathes kids without asking because you are answering emails from prospective clients or filling orders.
- Your mom tells her bunco friends about how much better she sleeps because of that “water steamer thing” and the oils you gifted her for Mother’s Day.
- Your girlfriend willingly invites her work friends over for wine and picky foods so that you can share your opportunity and products with them.
Which feels like stress? Which feels like you have a shot? Exactly. The people you surround yourself with can have a much greater influence on your business than you can possibly imagine. You do need support from family and friends when you start ANY business. Direct sales is only different because people are uneducated and make assumptions about the framework.
Will you have access to training opportunities from your sponsor/upline?
I recently met a woman whose upline (those above her in the organization that makes a small commission on her sales) is “killing it” in the business. Heck, I’m brand new to the city and even I’ve heard of the organization she is a part of. The problem is, this particular woman is struggling. Why? Because the core of her support network is located five hours away. She attends team training and meetings sporadically via Skype video. She’s the only ‘talking head’ on a laptop screen located on a table while everyone else attends in person. Total party pooper, yes, but it makes training and motivation that much more difficult. Don’t underestimate having a local/regional support team around you. I have worked with many and provided group coaching within such a support structure. In my opinion, your in-person network while in direct sales is vital to success. I will say I have seen (and helped cultivate) a strong community of online support within downlines. It can be done. Just make sure the downline you ultimately join has something consistent to offer you.
Note: If you are growing a downline, it is V-I-T-A-L for your organization to go above and beyond to develop training and coaching for those that work with you. Over the past 20+ years, I have seen and worked with a lot of direct sales downlines, and mostly those that have developed their downline had longevity and consistent sales (and won the most contests!)
What intangibles are you looking for?
Whether they admit it or not, a lot of women start direct sales business to find things like friendship, purpose, and social opportunities. Maybe a particular product has changed your life and you want to share it with the world. Heck, maybe direct selling feeds your competitive side in a fun and profitable way. Money isn’t the only motivator for wanting to start a business. A lot of women (myself included – see disclaimer below) choose to sign up with a direct sales company for the discounted pricing.
If you understand not just the why of building your own business, but the why of what you personally want to get out of it, it will help you keep focused.
Picking a Product
Once you’ve found some really great direct selling companies to work with, you will need to narrow down your choice.
Do you fully believe in the product, the results, and the mission behind the products and company?
You cannot (successfully) sell something you do not use or believe in. Again, go back and take a read over my article “Would You Pay Someone for Your Own Product?” While this doesn’t always hold true – I know women who sell baby products and children’s books but don’t have a need for either – you should at least be comfortable with the quality of the products and ethics and mission of the company behind them.
Do you want to sell a product because you want to hang out with a friend or help her out?
Both are horrible reasons to start a direct sales business. You can be her biggest fan or best customer, and maybe even volunteer to help her stuff envelopes or schlep gear into a party. Actually, that’s not such a bad way to test the waters. Besides, your friend probably doesn’t have tons of cash around to hire help – the average successful direct sales consultant makes $28,000 a year. (Just know that is an average – I have worked with a number that made $100k a year, which means many more are making significantly less.)
You Can’t Take It With You
If this article turns out to be popular (share it and link to it thanks!!), I’ll expand it and add additional sections to cover this section in more detail.
When it comes right down to it, you probably cannot “take it with you.” What I mean by that is that you can’t just start selling products for any price you set or under different guidelines than were given to you (such as making non-approved claims as to use, cures, or results,) or sell competing (or any other) product at the same time.
I’ve seen top earners for direct sales companies will their downline to their families, SELL their downlines, MOVE their downlines or even break it off within the parent company to focus on a specific line of products. You need to read your Distributor Agreement in detail (it is a contract, READ IT!!) to see what is allowable. Some things are ‘off the contract’ negotiable if you are a big enough earner in the company.
What I will recommend right away is to start a Facebook (and possibly email) group for your downline and a separate one for your customers. If you ever leave the direct sales organization, you at least have a network with all your customers. Again, read you Distributor Agreement to see what you can and cannot do.
Side story to show how important this all can be: A few years back I attended several home demonstrations with a kitchen party sales company. Their #1 representative was an absolute hoot and people would attend complete strangers parties just to see him! Crazy right?
One day I get an email saying he’s ‘switched teams’ and now selling something completely unrelated and he took most of his downline and customers with him. WHOA. I was in his VIP client Facebook group and all he did was update the name of the ‘thing’ he was selling and then POOF! he had an instant customer base of nearly 10,000 people. CRAZY RIGHT?!
The grapevine tells me the new company offered him the same compensation plan and levels (basically the highest in the company) if he brought x% of his downline with him. The old company? Well, they lost nearly 20% of their annual revenue buy losing this ONE representative and downline. DANGEROUS all around. Rumor has it he’s since gone back to the first company, but I’ve lost track since moving out of the area.
READ. YOUR. DISTRIBUTOR. AGREEMENT. 😉 You never know how big you will be when you first start.
Wrapping It Up
The decision to start a direct sales business isn’t one that should be taken any less seriously than starting a retail location. There are lots of ways to run a business from your home and direct sales is a great option for the right person.
If you currently own a home business of any type and feel you could benefit from working with a coach that not only specializes in family-centric entrepreneurs but direct sales consultants – reach out to me. I’d love to chat.
Thanks for reading! Now I invite you to comment with your experiences and tips!
Over time I will be adding updates and additions to keep this article as up to date from my experience as possible. Please note that what I’ve written is not an exhaustive discussion of the direct sales industry, but rather my own personal and professional experience over the past twenty years. I will, however, not tolerate MLM bashing or specific instances of calling out direct sales companies. I mean this as a positive resource to help facilitate meaningful thought around choosing to represent a direct sales company.
Disclaimer: I currently purchase many products from direct sales companies. I do hold a reseller account for Young Living Essential Oils because I absolutely love the product. I don’t however, actively promote or sell the line unless someone contacts me directly about the products.