Start a Direct Selling Business
- Thursday, August 30, 2012
Editor's note: This article appeared originally on June 29, 2012 at Debt-Proof Living.
Looking to make a little extra cash while raising a family? Always dreamed of owning your own business? Recently retired and want to add to your nest egg?
If any of these sound like you, the solution could be starting your own direct-selling business - you know - with a company like The Pampered Chef or Silpada Designs, where you sell goods through home parties and one-on-one consultations.
Direct selling has become big business: In 2011, the 15.6 million direct-sales representatives working in the US generated more than $29.8 billion in revenue, an increase of 4.6 percent over 2010, according to the Direct Selling Association (DSA), a national trade group. Given the state of the economy, that is quite amazing.
The pros: You’ll be your own boss, work flexible hours that fit your schedule, meet new people, sell what interests you and make money doing it.
The cons: Despite what recruiters might promise, you probably won’t have customers beating down your door, especially in the beginning. You’ll become familiar with rejection, because not everyone you approach will become a paying customer. And while some direct sellers do indeed earn six-figure incomes, for most sellers the income probably won’t replace a full-time career. The DSA reports that the median income for direct sellers is currently about $2,400 per year.
Given that, supplement is the key word here. If you’re looking to make extra money to augment your income, read on to learn more and get the party started.
Party Fact: Passion sells. Experienced direct-sales consultants will tell you that to be successful, you need to choose a product or service in which you really believe, one you use yourself. When you’re excited about something, that excitement is contagious, which can lead to higher sales.
Party Fact: It doesn’t take as much money as you might think. A startup kit (training materials, samples and actual products) typically costs less than $100. Once you’ve started to set up parties and generate sales, your costs will - depending on the company - probably be limited to replenishing order forms and catalogs and running your home office.
Party Fact: When you think of direct selling, you probably think of home parties or “shows” in which consultants display the products they’re selling at parties they host in their own homes or in rented spaces.
Consultants can also sell their goods one-on-one, meaning they might invite a friend over to look at the products, or set up appointments with just one person at a time. While one-on-one sales do give you time to really focus on one person’s needs, volume is how you’re going to make more money.
Party Fact: You’ve got to get out there. Being a consultant means getting out and selling your wares. You cannot be timid and shy.
If you sell jewelry, for example, you may find that wearing the products wherever you go is the best marketing tool. As people comment, be ready to tell them about the company and suggest that an easy way they can get what you’re wearing for free is by hosting a party. If you sell cookware, be sure to use it when you bring food to the PTA meeting or church potluck. If someone notices it, strike up a conversation and talk about the company.
Party Fact: There are two ways to earn money. Whether it’s jewelry, cookware, kitchen tools, makeup, scrapbook supplies or other direct sales products, you earn a commission on everything you sell. The DSA reports that, on average, a direct seller earns 10 to 50 percent commission, depending on the company. So, let’s say that as you get started, you sell $600 worth of products in a month and your commission is 30 percent. You’ll earn $180 ($600 x 30%).
But as a consultant you may also attempt to recruit other people to become consultants under you, which makes you their manager. When this happens you get a commission on their sales, which is known as multilevel marketing or MLM. If you find 10 people to become part of your team, and each of them sells $600 in products that month, your 10 percent commission on those sales will be $600.
One more thing: Direct-selling companies also offer appealing incentives in the form of bonuses, cash prizes, cars and trips to encourage consultants to sell and recruit more. So you could make even more through incentives.
Party Fact: You can get out if you don’t like it. Before you sign up, consider what will happen if you decide direct selling isn’t for you. At the very least, go with a company that will buy back your unsold inventory. Companies that are members of the DSA (most of the big ones are) are required to buy back unsold marketable products and sales aids (like catalogs and order forms) purchased within the prior 12 months, for at least 90 percent of the price you paid for them. Some companies will refund your startup kit, but don’t expect a refund of the expenses for setting up your home office.
Three Success Stories
“I became a Pampered Chef consultant in 2005 because I needed to pay off our credit-card debt. We were struggling on my husband’s paycheck, and I was desperate to find something that would provide the flexibility I needed to homeschool our four kids (ages 11, 9, 4 and 2 at the time), and work just one night a week.
“I started holding Pampered Chef ‘cooking shows.’ Customers buy kitchen-related products, and I earn commissions of 20 to 27 percent on my sales. I earned back the starter kit cost of $155 at my first show. My income steadily increased as I got the hang of the business. In the first six months I earned enough to completely pay off our credit-card debt.
“While most new consultants can expect to earn around $850 to $1,000 a month if they hold two cooking shows a week, after five years I’m averaging more than $5,000 a month, holding an average of eight shows each month, working about 30 hours a week. The biggest lesson I’ve learned is to never assume anything. I’ve been so surprised by who says yes to purchasing products and hosting shows. If I only approached people I assumed would say yes, I’d miss many opportunities.”
“In 2007, when my homebuilder husband told me that I needed to find a way to help get us through the recession, I knew it couldn’t be a regular 9-to-5 job. I’d been a stay-at-home mom for 12 years and still needed to provide the parental support my kids, ages 8 and 11, were used to. So I joined Silpada Designs, a company that sells sterling silver jewelry, belts and watches.
“In 90 days, hosting three parties a month, I made back my initial investment (a $199 certification fee plus the upfront purchase of jewelry to wear and show), earned $3,500 in free jewelry and made a small profit. Three years later, my business pays the mortgage occasionally and also makes it possible for us to enjoy extras like travel and skiing.
“Most Silpada Consultants, who hold an average of two home parties a week, work 24 to 32 hours a month and earn 30 percent of retail sales. The average take-home pay for one party is $285.
“While making extra money has been nice, I’ve also learned that I’m good at running a business. I love to come up with ways to improve my customer service;I always return phone calls quickly and follow up with customers, and I’ve found that simple thank you notes are my secret to repeat business and building a network.”
“Five years ago, when my children were 1 and 4, I wanted to spend more time with them, so I went from being a full-time elementary school teacher in one of the highest-paying districts in the country to teaching half-time. I made up the income by becoming a consultant with Heritage Makers, a company that allows clients to make their own professionally bound ‘storybooks,’ digital scrapbooks, cards, canvases, posters and photo gifts. The startup ranges from $50 to $150.
“At that time, I worked 6 to 8 hours a week from home, doing online webinars, one-on-one demos and one weekly evening workshop. The average workshop sales range from $350 to $500, and result in a $100 to $125 commission. One-on-one appointments pay an average of $60 for new consultants and $80 for experienced consultants.
“When I started I was earning an average of $500 a month. But in June 2010, my home business was doing so well - earning me $2,000 to $3,000 a month - that I took a leave of absence from teaching to stay home, and upped my Heritage Makers hours to about 15 to 20 per week.”
© 2012 Debt-Proof Living. All rights reserved. Used with permission.
"Debt-Proof Living" was founded in 1992 by Mary Hunt. What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt. Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates. Click here to subscribe.
Publication date: August 30, 2012
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