Dream business opportunity or costly pipe dream?
We all have friends or know someone who has invested in a direct selling business. They are the ones who invite you to product parties, set up their stall at summer fayres or give you their sales pitch at the school gate.
These schemes have been getting some bad press recently, but on the other hand, there are undoubtedly some people out there making good money from them. If you’re contemplating joining a network marketing business, read on…
How do they work?
You usually invest in a ‘starter pack’ of products. As an independent, self-employed sales consultant, you then sell individual items to family, friends, in fact anyone in your network.
In order to get started, you choose an established sales person as a mentor and they recruit you into the business as part of their team.
Perfect for Mums
If you are a Mum who wants to or needs to earn money, the direct selling opportunity seems ideal, doesn’t it? Who doesn’t like the idea of being their own boss, working flexible hours, working from home, selling gorgeous products? Don’t forget the added bonus of buying into a proven, well established brand with a relatively low investment compared to setting up a business from scratch.
As the saying goes, if it sounds too good to be true, it probably is. In the case of direct selling, it’s not as simple as it first seems. If you are looking for a hobby with the added benefit of some income and can easily afford the required investment, there’s probably not too much to worry about. But read on, especially if you are sold on the idea of a huge income in exchange for some hard graft.
Here are a few less-talked-about truths:
The products are expensive
Selling the products won’t necessarily be a walk in the park. Because commission is paid up the chain of team members above you, the end customer usually pays well over the odds for the product and depending on what it is you are selling, it can be obvious at point of purchase.
You might be required to reach minimum sales each month, before you are eligible for commission on your sales.
Not all direct selling businesses stipulate this requirement, but many do. Worth finding out beforehand.
Your local area may be saturated already
If you are considering investing in a business, do some research first to see who else is around. If you live in a small town and there’s already a couple of sales consultants on your radar, then think carefully before you jump in. Even if you aren’t aware of anyone else selling the same products, ask around as much as possible. The nature of the business means that direct sellers (or network marketers) do not advertise their products in the traditional way or have online shops.
To earn a living, you will need to recruit team members under you.
This is how successful network marketers make their money. It’s not the products they are selling themselves, it’s the people they are bringing into the business. If you are really clever, you will get in there early and sit in the upper levels of the business. Many of those in this position stay the course for many years as team members recruited beneath them in a pyramid-shape formation feed commission up the chain. They don’t actually need to sell any products themselves. As you can imagine, it’s a different story for new recruits when the business is already established.
Your ‘friend’ who wants to recruit you may be naïve or even plain dishonest
Sounds harsh, but might be true. As stated previously, you’ll make most of your money in this business by recruiting new team members, not usually by selling the products. These companies arm their reps with glossy marketing materials, parading the big winners of their organisations. They are not lying. There are always big winners in these businesses and it works like a dream for them. But (and it’s a big but) they got in there early, possibly even when the business was first launched. Depending on which brand you are interested in, your chances of doing the same are probably somewhat lower.
Are you sure you’ve got what it takes to sell?
The person recruiting you into their team is unlikely to turn you away. Even if it’s clear to them that you couldn’t sell for toffee, they stand to directly benefit, not only from your sales but also from your ‘starter pack’ expenses. Maybe you are confident in your abilities and perhaps you already have sales experience. Are you really going to be comfortable repeatedly asking friends and family to purchase or make referrals? Some people are fine with this but it’s not for everyone and it’s not easy.
So, what should you do if you still like the idea of the opportunity but are feeling unsure about whether to jump in?
Don’t be afraid to ask some very direct questions of the business. If there’s nothing to hide, they won’t have a problem in providing you with the information.
- Ask to see an income disclosure statement so you can see at a glance the average earnings of other consultants at your level.
- Do they have any processes in place to avoid area saturation and thereby giving their consultants a fair chance at success?
- How many reps come and go on average within any given year?