I’ve been a consultant for four different Direct Sales Companies over the last ten years. Each time thinking, “Well this one will be different, or better because of….” and each time I’ve wished I would have either done it differently or not at all.
The first time I was young and went into it because a consultant convinced me I could make a full time salary and be my own boss. I ended up losing over $1,000.00. The second and third times I went in with more realistic expectations, but still learned a few lessons the first go around didn’t teach me. The fourth time, well I did it just to get the products at a discount, and I even learned a lesson with that as well.
What are some of things I wish I would have thought about before signing up?
I’m not going to name the four companies I was involved with. My goal is not to “hurt” anyone’s business or trash a company. Remember my goal is to just give you “something to think about” before making a decision. So, I’m going to tell real situation but I’m going to use fictional stores, merchandise and pricing.
1. Would I buy this product from someone else for the same price I’m asking them to pay?
Of cousre the advertisements and the “sales pitches” sound great in your head, but what are you really asking your friends and family’s to buy here? Can they get this anywhere cheaper or is this really worth the money you are asking for it?
2. Can the average person or your potential clients afford this product?
I wasn’t planning to sell to wealthy house wives or celebrities. I was planning to sell to my friends, family, contacts in the community, etc. One client pointed out to me,”I get my face cream for $10 at B-Mart. I can’t afford to buy your $30 face cream.” Of course I responded with all of the things the consultant who signed me up told me to say. “It’s a million times better than B-Mart’s product and (insert all of the sales pitches you can think of here). ”
Do you know what the lady’s response was?
“Well I’m sure a Lexus drives and looks better than my Ford, but I can’t afford a Lexus so all of the good things you could possibly tell me about a Lexus don’t mean anything to me.”
I realized she was right. I only wish I would have realized that before I had paid $600.00 to purchase inventory for my new business.
Yes I was going all in. I bought a planner, made a template to send out a weekly newsletter (internet wasn’t as popular yet), I bought business cards. I was all in to my new “business” before I had even considered the price of what I was selling and the fact that all of the people I planned to sell to might not have the budget to buy it.
3. Does this product really work? And Does this product work better than the like products on the market?
So let’s say your product is affordable for the average person. Now, you have to figure up how many people are going to want to buy it and are they going to prefer it over whatever they are currently using. Just because they can afford something doesn’t meant they are going to be busting down your door to buy it.
What makes this product different than anything else on the market? If there is nothing else like it on the market, then the question is does it work? and Not only does it work,but does it work enough to keep them coming back for more?
Of course the person selling it to you is going to tell you it will fly you to the moon and cause gold to grow in your front yard, but what do you know about the product first hand?Have you tried it? Are you comfortable with taking your friend’s and family’s money in exchange for this product? or are you going to have to exaggerate a little to sell it?
I remember the first consultant who approached me to sell make up years ago. She had me with my check book out and ready to hop right into business to sell this one of kind product that no one else had and everyone wanted. I didn’t do any research because this lady was an excellent salesman. She had me hanging on her every word. But one very important thing to remember is: It is that person’s job to sign you up to sell this product. I’m not saying that there aren’t real consultants out there who believe in their product and who are genuine. But the thing is, everybody has to make a living and the way their pay check is set up is based on how many people they can talk into selling it. They want you to sell it because they are going to make money. Sure they may want you to make money too, but don’t forget about the benefits they get from signing you up.
It wasn’t her fault that I liked the product and really thought it worked. It wasn’t her fault that I didn’t go to a drug store and price make up and look for like products to see if I really had a product that was one of a kind. It wasn’t her fault that I didn’t consider that not everyone can afford expensive make up.Some people would have loved to purchase the make up I was selling, but it just wasn’t in their budget.
4. Even if the product works does it work like the Company says it will work?
My other mistake in this area was buying a weight loss product before testing it myself. I was so shocked with other’s results that I wanted it and I wanted to sell it. The problem was, I was a month into it before I realized “how” it worked.
This could (and will be) a whole other type of blog post, but to explain what I mean.
Some consultants “over advertise” their products promising more than what the product can actually do. Weight loss is a big one with that. Without diet ,exercise,or both, you are’t going to lose weight. It’s science. Most of the direct sales weight loss products are “supplements” to a diet or exercise regime and do just what they were made to do. However, if you are advertising, “don’t do anything,but take this pill” and someone buys it with that in mind, It isn’t going to work for them. They aren’t going to come back next month for more.
Bottom line- make sure your product description doesn’t have to be stretched to gain customers.
5. How many do you have to sell to make money? Is that a realistic figure? How often will your customers need refills?
So let’s say you’ve surpassed all of the other questions and you have a product that really works, that is affordable, and that you think your friends and family are going to hop on board to buy. What other problems could you run in to?
Okay so most companies don’t pay you very much commission when you first start. You have to earn that right?
So let’s assume that your first month into it you sell $800.00 worth of product. Okay you make 25% of that which is $200.00. Assuming your “new business kit” was $100 plus shipping so $109.99 and you signed up for a website that is $12.00 per month, you profited $78.01 this month. That is if you had no other expenses and didn’t buy any products yourself to use as samples.
So you’re thinking a profit is better than a loss and next month I won’t have start up cost so I’ll do better. Right? The question now is: Can you sell $800 again next month?
Is everyone who purchased last month going to buy it again? Will they be out already and will they be able to afford to return monthly? Will they want to come back monthly?
6. If not, is there more people out there (realistically) in your network zone that you could reach out and possibly sell to? Sure, you know a lot of people, but do you know a lot of people who can afford this product? People who will be interested in buying it?
Because I never thought of it like that. I sat down and figured up how many make up clients I could sell to and thought “hey just within my basic friends and family all purchasing their make-up, I could sell $800 worth of makeup.” Heck yes! What I didn’t think about was, “who of my potential clients can actually afford this?” and if they do buy it, “how long it would be before they ran out and had to purchase it again, and what would I do for the months they didn’t need refills?”
Of course I planned to venture out and gain clients from all over the place, but that can be a challenging task too.
How big is my reach for clients? Even considering the internet, text messaging, my out of town family, you have to consider how many people you can actually reach and their likeliness of buying from you Which brings me to another important factor: Do they already purchase this(or a like product) from someone else? How many people already sell this? How many customers am I going to lose once my recruits start selling on their own?
7. Do you have a big enough network to recruit people to sell and still have enough customers to meet your own quota each month?
Let’s say someone from out of town recruited you to sell this new product. So you have your whole town to dig your claws in to and sell, sell, sell! Right?
If this isn’t a fad business that is going to fade when something better comes along(or when people realize it doesn’t work or BMart starts selling it cheaper), you might be onto something by being the first in your town to take a shot at this. You could potentially recruit outside of your personal circle.
Yeah, it would be great to get your friends to sell it too, but then who is going to buy from you? I made the mistake of signing four friends up to sell the same product I was selling at my opening party.
It seemed great! I had just started and already had four people under me. The problem? All five of us now had to meet a quota. We were all five from the same area so we had a lot of people in common which meant I took my potential client list of 20 and subtracted 4 people leaving me with 16. That might have been okay except for some of my 16 were sisters, mothers, grandmothers, aunts, etc to the other people I had just signed up. That left me with a potential client list of 8 people. Which was less than what I needed to be profitable.
Sales reps told me, “no worries you are now going to profit from what they make.”
I was excited about my team and how much we were going to make together. Although once I really got to looking at the chart wasn’t that much compared to what we were going to be able to sell.
Considering the town size(this was before social media connected the world), our connections with out of town family, and our social groups we all figured up what we could make each month, and we were super disappointed after putting numbers to it.
Just to give you an idea, and I’m not going to use our exact titles and figures so that the exact company isn’t revealed here.
If I now as a Blue Heart Consultant sold $800.00 per month in product I would now get 50% of that monthly which would be $400.00. If each of my Gray Level consultants sold product they would get 30% and I would get 5%. If they each sold $800.00 they would each receive $240.00 per month.I would receive $40 from each of them which would be $160.00.
So let’s say I only spent $5o a month running my business. I would profit $510.00 per month.
That’s approximately $130.00 per week. Had we have all been able to meet our quotas that would have been a nice extra paycheck, but it still wasn’t enough to quit my full time job.
Realistically we weren’t able to sell that much product.If we all met our goal that would have meant selling $4000.00 per month in make up as a team. That is quite a bit of makeup.
That is a lot of pushing and peddling for me to make $510 a month and them to make $240.00
AND We didn’t decide to sign up to “make $100 (or $60) extra dollars a week pushing and peddling.” We were “sold” on signing up by “make enough money to quit your day job.” That was what we were hoping to do.
At that point in the game, they were stuck because each of them needed to recruit 4 people to reach the next level. They weren’t having much luck with that.
The first thing I realized- I wasn’t just depending on my ability to sale and work hard. I was depending on others to work and want it as hard as I did. If they didn’t meet their quota, they made no commission-which meant I didn’t either. Even if you recruit top notch hard workers, even the hardest go-getter can get discouraged. There is only so many people you can sell to, and if you are competing with a growing number of sells competitors, the numbers get lower and lower.
So I was essentially losing sales/clients to my recruits who’s sales were pointless because they weren’t selling enough to make their quota and earn commission. Even if they made their quota and I made a commission, I only made 4% of my team’s sales, but I could have made 50% of my own sales. So I would benefit more from making the sale myself. HOWEVER, the company had me trapped because without my “team” I went back to making 24-30% of my sales. Which still would have been more than my commission from theirs.
Of course, NOT all companies are set up with this exact model. You need to read the set up. If you can realistically build a team who sells and you just sit back and feed off of their profits, that would be ideal. But it’s not as easy or as feasible as some people would like you to believe. At least it wasn’t for me.
Definitely do your research all the way to your goal. Don’t just research what you can make “now.” Research all the way up to your goal income and make sure your expectations are reasonable.
8. How much is my family “helping” me by buying from me? Or are they helping my company make millions?
A lot of publicity now goes towards “helping single moms by shopping direct sales” or “help a friend instead of a big company.”
How much is it costing them to “help” you? and are they really just “helping a big company make millions?”
So if I sell a $30 hair product to my mom, and make 25% that means I made $7.50. If there is no where else to get that product, then that’s not a bad thing. However, if a same or similar product is offered at B-Mart for $15.00, then my mom could give me $7.50 after she bought the product and still save $7.50. Obviously, you don’t want to ask your friends and family to just give you money, but I’m not going to ask my friends and family to spend $15 more than they usually would on a product for me to make $7.50 either. The truth is, the huge company is still going to make their money. When the stock markets talk about these companies being billion dollar industries, they aren’t talking about the consultants profits. They are talking about the actual “company” profits
In 2015 one direct sales company paid over 14 million dollars to 5 employees in salaries. Divided up like this: The CEO made over 6 million, Vice President made almost 3, and three other employees on the list working in management made just under 2 million a piece.
So I feel bad about asking my friends and family to spend twice what they would usually pay for me to only make a fraction of the extra money they are spending. This is just my take on it, and some companies could be set up differently. However, this is definitely something I would look into before I make any future decisions with Direct Sales.
9. Will my product stand the test of time? Is this a good investment?
A more recent experience I had was signing up for a make up company without serious goals, but to sell on the side to get my make up cheaper and potentially make extra cash.
It was a great thing because the item I wanted I couldn’t get from anywhere else. However, soon the product I wanted started being offered by other companies and eventually BMart had something just as good for a fraction of the price. For me, this didn’t matter. I hadn’t invested much at all in my “business” with this particular company so I wasn’t losing anything.
But I felt bad for those who weren’t just selling it casually. Some people go into this direct sales stuff investing hundreds of dollars for product inventory. Or spend hundreds of dollars building their client base and finally get to a place where they are making a profit, and then find out that they can’t compete with drug store products/brands. It takes a long time to build a great business. If you spend 6 to 12 months building this business and investing time and money into it, will it crash when you finally get to a profitable level? Is this “product” going to still be marketable a year from now-when you reach your sales goals?
10. Are you going into this with realistic expectations?
How much do you really want to make? How much can you really sale? This has been addressed off and on throughout the post so I’m going to be quick here.
My first few experiences with Direct Sales, I did not have realistic expectations. I didn’t consider my expenses correctly. It cost more than the $100-$200 startup kit to actually be successful.If you think you can start using the start up kit only, I’m afraid you are going to be disappointed. I had a friend who was getting a $150-$200 check every month from her company and was satisfied with her “extra” income.However, we sat down and figured up just how much she was spending to make that $150-$200 per month
The first 3 months her pay check wasn’t a profit because she had spent money on a presenters kit, business cards, sample products, pens and clipboards for parties, etc. On the fourth month she sold $1,000 in product and assumed her $200.00 check was all profit so just continued to sell. I asked her, “how much time are you putting in each month for your $150.00-200 and what are your monthly expenses?”
Not looking at her first three months of sales, we took her best month and used it as an example. She sold $1011.00 in product for the company. This didn’t include the “hostess” items that her hostess had been able to order at 30% off or shipping and handling. This was her sales and the amount she was paid commission on. Her check was $252.75. That month she had paid $12 for a website, purchased $25 in product to give a way as a promotion, attended one party where she gave a away a $10 promotional item that she paid for,spent approximately $15.00 in gas making deliveries/going to parties, and a new product had launched so she had to buy it for herself in order to be able to discuss it with her customers and that product cost her $45. So her actual profit was only $150.75. But how much did she have to work to earn that? You don’t sell $1000 in merchandise by sleeping. So we figured up her time. She spent 3 hours (set up and take down) presenting a party, she spent approximately two hours per week making promotional videos – so 8 hours that month. She spent an hour a day online talking to customers trying to sell products and managing her social media platform. So assuming she rested on Sundays lets say 6 hours per week which is 24 hours a month online reaching out to customers. Without calculating in the time she took to input orders, go through and sort/deliver items(when they didn’t ship directly to the customer), check her business website, research new product, look at the new specials and products for the month, and look up new ways to sell her product—She was already spending 35 hours a month minimum to sell this product. $150.75 divided by 35 is $4.30 an hour. She was working more than 35 hours a month so technically she was making less than $4.30 an hour pushing and peddling this product.
If you are okay with that scenario then by all means, $4 per hour is better than $zero an hour. Some people look at is doing what they love and getting paid for it. However, some people are going into it with the hopes of making an actual living. I read a blog by a girl who quit her job to do direct sales, and she almost immediately regretted it. She had a hard enough time making sales as it was, but to add to it, three months after she quit her job the “craze” of her products started to fade and negative controversy started to surround it. Her sales started fading immediately. Even if she had reached a profitable level in her business- which she didn’t, she still would have needed her job back when the product faded.
All I’m saying is make sure you have realistic expectations and goals.
So now that I’ve written a novel here! I will conclude with the disclaimer that this isn’t to stop you from going into direct sales. These are just my mistakes (and mistakes others have told me about). There are success stories out there. There are people who make a living doing this very thing. Sometimes their story is inspirational and makes you want to hop right on board, but just make sure you consider all of the possible outcomes before you go entering your credit card in online and investing in a “business.” If you want to go into direct sales, make sure you have all of the information and you choose the right company!