Josh Elledge - Chief Executive Angel
At some time or another, women especially, have been invited to a demonstration/home party. Any of these ring a bell: Avon, Shaklee, Mary Kay, or Tupperware? How about Legal Shield, Isagenix, Nu Skin, or Forever Living? Literally hundreds of companies all over the world have opted to promote their products via home sales and independent distributors, also known as network marketing.
Not only have we been invited to these types of ‘parties' but most likely we've also been asked to join their team.
The “hook” generally involves things that appeal to someone who wants to work from home to replace or supplement their income or to fully engage in a new career.
You've probably been told things like:
– You can set your own schedule.
– The upfront cost is very low compared to most retail businesses.
– You are your own boss, not an employee.
– You can buy the product and get it for yourself at wholesale prices.
– The product “sells itself”, you don't need to be a salesman.
– The company offers great bonuses or incentives.
Although each of those statements is likely true, there's more to consider if you want to become a successful independent distributor. Before being caught up in a moment of excitement at a home party, or pressure from a well-meaning family member or friend, seriously consider what it takes to be an independent distributor. Most distributors fail at their businesses because they didn't give enough consideration to what is really involved to be successful.
Things to think about:
1 – When you become an independent distributor, you become a small business owner. As such, this may require that you register your business with your city, county, and state. Check with your secretary of state's office to see if it is necessary.
2 – You will be buying products at “wholesale” and reselling it to your clients at retail.If sales tax is being collected, you may be required to file sales tax with your state and possibly local municipality too.
3 – You are the sales manager and customer service rep between the buyer and the product manufacturer.Processing returns, damaged goods, and any other product issues will become a part of your job.
4 – Be sold on the product or line of products yourself. This is huge!It stands to reason that you won't have the enthusiasm, commitment, or discipline to put in the time and work required if you can't give the product your wholehearted stamp of approval.
5 – Research the company and what is expected in order to receive and maintain a distributorship. What are the qualifications? Does it require any previous experience? What does it cost to start up? Are there any fees involved? Do you need to carry inventory? Is there a monthly, quarterly, or yearly quota? How much training is there? Do you have to pay for training? What kind of encouragement and support is available to you? Does the company provide you with marketing material and at what cost?
6 – Check the compensation package. Does the company offer bonuses? How much do you need in sales to make a good commission?
7 – You need a marketing plan. Many distributors have their businesses dry up after a few months because they didn't put together a marketing plan to take them beyond their circle of family and friends.Mom and Aunt Suzie only have so much space to store all that Tupperware.
8 – You have the opportunity to create a downline with many independent distributorships. In other words, you are able to expand your business by setting up others in their own business.By “sponsoring” someone else, you can profit from the sales production of those you sponsor. Referred to as multi-level marketing or MLMs, these businesses are sometimes mistaken for a pyramid scheme. If you are getting paid based on the number of people you recruit and your sales to them, it's not multi-level marketing, it's a pyramid scheme. Pyramid schemes are illegal and you stand to lose money getting involved in one. Most large companies I've mentioned above are safe bets.
9 – If you want to get into an independent distributorship business, stick with companies that you know are tried and true, those that have been around long enough to have become a household name. However, if you've heard about a company or seen the products from one that really piques your interest, be sure to check it out thoroughly. A good website to check the legitimacy of a company is MLM Watchdog.
10 – Consider whether or not the product/product line is something that is just a fad. If so, it is likely that interest will wane after a while, causing your business to dry up; and ultimately costing you money for any upfront costs or product supply costs.
11 – Carefully research ‘like' products. Is this something that can be purchased elsewhere less expensively? Most people are frugal, and won't buy what they view as the same goods at higher prices – no matter how much they like you. And don't fall for the line that the higher quality will cause people to happily spend more. You'll really need to work hard to convince people that higher prices are truly worth it.
How much can you realistically make?
Conservative estimates for a new, hard-working distributor, starting out with a solid company, and sought-after products, is $50 to $200 per month. But, because home-based businesses (MLM's, distributorships) vary so widely, how much you can make really depends on four factors:
(1) How sought-after the product is; that is, how easy it is to sell. Does it truly “sell itself”? Are you able to sell a lot of product month after month?
(2) How hard you are willing to work. Setting your own hours is just that – you have to set your hours. Working one or two hours a week will not be enough to earn much. You'll need to work leads, and make contacts, so you can continue to reach new customers month after month.
(3) What percentage of the retail price you'll make. Many distributorships hover around 25-30%. So if you have products that cost an average of $15, you'll make around $4 per item. This means that you'll need to sell a lot to have it add up to much. Some percentages also depend on your sales volume. The less you sell, the lower the percentage of your cut. (Of course, there are some companies that offer more generous percentages.)
(4) Whether or not you get overrides from a “downline”. That is, whether you get a small cut from what other distributors that sign up “under” you sell. In honest companies, most distributors make a small percentage (such as 7-10%), called overrides.
(5) How long you work at it. Many independent distributors who stay with it, average earnings of $19,000-$40,000 annually and more, but it takes time to build your earnings.
To really decide if starting a distributorship is right for you, there is one above-all rule of thumb: do your homework first! Don't allow the excitement and emotion of an in-home party get you signing on the dotted line that night. You can always sign up later after you've thought it through, researched all the costs, considered if you really have the time, and even chatted with others that have been in the business (or a similar one). That way, you'll be making a well-researched, level-headed decision. After all, you're considering starting a business – not just buying a product.
