2017-03-15 00:00:00SalesEnglishLearn the basics of direct sales, what advantages it offers to an entrepreneur, and how to distinguish legitimate business opportunities...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Woman-Checking-Things-To-Know-About-Direct-Selling.jpghttps://quickbooks.intuit.com/ca/resources/sales/is-direct-selling-right-for-you/Is Direct Selling Right for You?

Is Direct Selling Right for You?

3 min read

Direct sales gives you the chance to start a business quickly and with minimal overhead. It doesn’t require education or special licencing. The startup costs are low. Anyone is a potential customer, and social media can help you find customers faster than ever. Before jumping into direct selling, you should understand exactly how it works, what makes people successful in it, and what the potential pitfalls are.

How Direct Sales Works

By its broadest definition, direct sales means selling products to consumers directly rather than in retail storefront locations. Door-to-door and business-to-business sales both represent direct selling models. Even the Girl Guides who sell you delicious chocolate mint cookies each fall are practicing direct sales. The most well-known direct sales companies, such as Amway and Avon, use a multi-level marketing structure. With multi-level marketing, you make money from your own sales and from the sales of those you recruit – and in some cases, from the sales of your recruits’ recruits. Typically, you’re responsible for purchasing the inventory you sell. This represents your only overhead cost unless you choose to spend money on marketing. You don’t necessarily have to advertise, though. Many direct sales reps start with their natural market – often using social media – and rely on word of mouth to grow their business.

Career Independence

Perhaps the most attractive part of direct sales is the independence it offers. You’re not required to work certain hours, punch a clock, or show up at an office. There’s no dress code, and no boss is going to reprimand you for checking your phone or Facebook during working hours. However, the lack of a boss looking over your shoulder means that you have to keep yourself motivated. Direct sales isn’t a ticket to easy money; to be successful, you’ll need to work as hard or harder as you did in your nine-to-five job. The benefit is you get to run your business your own way, and you’re working to build your own empire, not someone else’s.

Income Potential

You can make anywhere from nothing at all to millions of dollars; it depends on the effort you put in. Having no guaranteed paycheck turns many people off from direct sales. This is why you probably want to set several months of living expenses aside before getting started. No matter how good you are or how hard you work, it takes time to build your customer base. If you have can-do attitude and a tenacious work ethic, direct sales can be insanely lucrative. For example, a high school teacher got into direct sales hoping to make an extra $500 a month and now makes over $200 million a year selling body wraps.

Identifying Scams

Direct sales, including multi-level marketing, is a legitimate business model that can be a great fit for the right person. Unfortunately, pyramid schemes and other shady ventures can lure in hopeful entrepreneurs by masquerading as direct sales companies. A pyramid scheme is an illegal investment structure in which money from later investors trickles up the pyramid to earlier investors. The difference between multi-level marketing and a pyramid scheme is that multi-level marketing participants make money off product sales. Pyramid scheme investors pay for their spot in the pyramid and make money when they recruit others to fill spots beneath them. Be wary of direct sales opportunities that focus more on recruiting than on the actual products. Sometimes pyramid schemes evade detection by creating a phony product – such as worthless insurance – to give the business the appearance of legitimacy. If your recruiter talks more about getting people to join beneath you than about the quality of the product and how to sell it, then whether the business is technically legal or not, it’s probably closer to a pyramid scheme than a sustainable direct sales business. With direct sales, you can start a lucrative business on a shoestring budget. Just make sure you understand what you’re getting into, and take proactive steps to avoid scams.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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