Choosing a Direct Sales Company

The Direct Selling industry is, without a doubt, one of the biggest industries in the world today. With over 62 million independent consultants worldwide, making total revenue of over $100 billion, direct sales is certainly one of the most dynamic industries in the world.

Why does direct sales appeal to so many people? Direct selling allows people to start their own business away from a retail location and this means that there are virtually no overhead costs for operating and since independent consultants work closely with a direct selling company, there is also no need to develop a product base or establish a new brand name. All of the technicalities of starting a business will be taken care of by the company you join and you simply have to concern yourself with selling your products. Direct sales consultants are independent entrepreneurs, not employees. Of course, direct selling does require a lot of hard work as well. To succeed, you have to be good at marketing your products and you have to manually build your network of customers to lead a truly successful venture.

Now that you've decided you want to get into direct sales, the next step would be to find a direct sales opportunity that is suitable for you. This can be quite tricky, especially if you don't have any particular company or product base in mind. If you do have a few companies in mind, you may want to try comparing direct sales companies side-by-side. The American Direct Selling Association alone has over 200 member companies, which means that there are hundreds of options available to you. Before you settle for the first company you come across, consider the following factors to help you in your search:

Product and Consumer Base

A lot of people join a direct sales company because of its product base. While this should not be your sole consideration for joining, it does play an important factor in the decision-making process. You get as many product options in direct sales as you would in a standard retail setup. Choosing a particular product base (i.e. Clothing, Jewelry, cosmetics, etc.) will help narrow down your options but remember that even then, you are still likely to have several options so it would help a lot to carefully consider all factors before choosing.

Aside from choosing a particular product that you enjoy, you should also consider whether you could tap into a large market when you sell these products and how well it would fare alongside other brands. Keep in mind, that you are first and foremost, an entrepreneur and therefore, you should carefully consider the potential for profit. The products you sell are crucial to success in direct sales and will determine your profits.

Give special attention to product quality and prices, as consumers are very much influenced by prices when it comes to purchases. Even in a direct sales setup, market competition is very much a reality so make sure that the prices of the products you sell are justified by its overall value.

Brand Recognition and Legitimacy

When choosing a direct sales company, you should do as thorough a job in researching as you possibly can, especially if the company is relatively new to the direct sales industry. Large direct sales companies that have been tried and tested by millions of consultants are relatively risk-free and can offer you adequate training and support but you should also consider the advantages of joining a new company. Lots of new companies have emerged in the last decade and while they are just beginning to establish a name for themselves in the industry, a lot of them offer a pretty competitive compensation plan that is up to par with some of the bigger companies in the industry. The primary advantage of joining a new company is the fact that you get to grow with the company and you get a better chance of being promoted to leadership positions sooner than you would in an established multi-million dollar company. However, joining an established direct sales company would give you the advantage of massive brand awareness, as consumers would most likely be aware of the company and its product base, making it easier for you to market your products.

There are pros and cons to joining both new and established companies so you should just weigh them first and decide the best path for you to take.

Compensation Plan

If you want to get into direct sales because you want to supplement your existing income or you want to gain financial independence while still having the freedom to manage your own working hours, then the decision-making process all boils down to one thing--- the compensation plan. What a direct sales company offers in terms of personal sales commissions, downline overrides, and as well as performance incentives can significantly influence the direction by which a consultant is headed.

Keep in mind that becoming an independent consultant for a direct sales company-any direct sales company- involves as much hard work as any other venture, so do not be fooled by companies that offer you thousands of dollars in your first month. Yes, a fat paycheck at the end of the month is very appealing but to get to that, you have to build a network, market your products, and sell them. Direct sales is not a shortcut to success but rather it offers an easier option for those who don’t necessarily have the means to start their own businesses, as startup costs are often very minimal.

Choose a company that offers an attractive but realistic compensation plan. If you work hard enough and manage to build a large network of customers, you should be able to realize your financial goals sooner than later. However, expect that, just like in any other business setup, there are going to be months where sales would be slow. This is normal and it shouldn’t be reason for you to drop out, instead, let it serve as motivation to strive harder. Your company and your uplines are behind you and are ready to help you get through slow months.

It has been a common misconception among many outsiders that a large percent of the people who join direct sales companies drop out within their first few months. This is actually nothing more than a misconception. In reality, most direct sellers earn adequate profits on sales and recruits and about 82% of them have been with their companies for a year.

Make sure that the company gives you a breakdown of their compensation plan before you start so you know exactly what you are getting into and ask for concrete figures of net commissions so you know how much you can potentially take home for every sale.

Startup Costs and Additional Fees

Your initial investment (i.e. membership fees, starter kit fees, and other additional fees) should also be carefully considered. How much a direct sales company asks from you initially can often determine the legitimacy of this company. The Direct Selling Association urges all registered direct sales companies to keep startup fees at a minimum and initial payments should at least include the starter kit fee. If a company charges a very high fee for joining or if you are asked to purchase large amounts in inventory volume with no real potential for product sales, then it is likely that the company is a pyramid scheme.

Most companies present a pretty clear and accurate breakdown of fees so make sure to ask for this before joining. You should also consider any additional monthly fees, annual membership fees, or website sponsorship and upkeep fees (if applicable). Also inquire about hostess rewards, as this may be deducted from your commissions though most companies offer a hostess rewards program at the company’s expense and not that of the consultant’s.

Quota on Personal Retail Sales and Buy Back Options

Not many direct sales companies impose a quota for monthly personal retail sales volume but there are also some that do require consultants to reach a certain volume per month, although very minimal, to be eligible for commission. If you want to join a particular company not necessarily for the profits but for the personal discounts on products rewarded to consultants then the quota may be a problem for you, especially if you do not intend to sell too much in retail volume. Make sure that you know how much is required of you for every month or cycle to ensure that you can handle your inventory volume.

The DSA or direct selling association also recommends that companies have a buy-back option for consultants who purchase more in inventory volume than they can manage to sell, especially for consultants who decide to leave the company without selling all of their inventory. Ask if the company buys back extra inventory items. The DSA’s code of ethics requires companies to buy back extra inventory volume for at least 90% of the amount that the consultant bought it for.

Now that you know the important factors to consider when choosing a direct sales company, make sure to also know what to watch out for to avoid scams, below are some important points to take note of:

  • Watch out for direct sales companies that ask for very high membership fees or ask you to purchase large amounts of inventory volume initially.
  • You should also make it a point to check if the company is a member of the Direct Selling Association or its equivalent. You get more protection as a consultant if you join a company that bears the DSA seal, as this means they abide by the DSA code of ethics.
  • Companies that offer very minimal or zero product value and focuses more on recruiting members are likely to be operating under a pyramid scheme. These companies may promise you a lucrative opportunity but they are likely to collapse eventually because there is no real structure and no intent to sell products.

Choosing a direct sales company can be a daunting task but once you find a company that you are happy with, it should be easier for you to turn your venture into a success. When choosing a direct sales company, do not be afraid to ask as many questions as you deem necessary and do your own research especially if you don’t know much about the company. Direct selling promises remunerative business opportunities for many people. Becoming an independent consultant is much like having your own business without the expensive overhead costs, elaborate marketing strategies, and the headaches and struggles involved in starting your own venture from scratch. Direct selling can change your life so make sure to explore all your options and choose wisely.