Questions to Consider When Choosing a Direct Sales Company

   So you've made the decision that a direct sales business opportunity just might be the ticket to allow you to stay home with your kids or to return home to them.  But there are so many great products out there and you've been to all of the parties.  So which company do you choose to represent?  You're so busy penciling in soccer practice and yoga that you don't want to take the time to look into a company so do you just take the first offer that comes along and sign on the dotted line?  Big mistake!  Not all direct sales companies are set up the same and not doing your homework may lead you down the road of regret and give you a bad taste about home based businesses in general.  Luckily, we've compiled a list of questions for you to ask- and these work regardless of if you fit into the mommy category at all (maybe you're a grandpa or single and haven't even thought of kids yet...doesn't matter- these will work for you too!).  I know it's a long list, but if you at least read through them, you might remember two or three of the important questions and should be able to weed through many opportunities.  If you are serious about starting a business, you owe it to yourself and your future success to seriously consider the answers you receive.  Good luck on your endeavor!

What exactly is Direct Sales ?

 

Businessdictionary.com defines direct sales as follows: “Face to face presentation, demonstration, and sale of products or services, usually at the home or office of a prospect by the independent direct sales representatives.”  See some more information and statistics about direct selling on the Direct Sales Association website: http://www.dsa.org/aboutselling/what/  There is a ton of great info here, much of it similar to the questions we pose below and it’s well worth the read.

 

 

Some Questions You Should Ask Before

Signing Up With a Direct Sales Company:

 

 

• What are the initial startup costs?

 

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  • The big question everyone investigating a direct sales company has is, “What will it cost me to sign up?”  In this economic climate any extra expenses can make a big impact on your family so be sure you are well informed before taking the plunge and joining direct sales company. All direct sales companies require an initial setup fee of some sort.  This may be only for registering with the company or for registering and a start-up kit.  Make sure you know upfront what the fees are and what you are getting for the fees you pay.  If it is for registration only, find out what additional costs there are for product, supplies, etc.  If the fees are for a start-up kit, find out what that kit contains and if there are any other supplies, etc. that may be needed to be successful.  If the start-up costs seem a little high for what you are receiving in return, this might be something to look closer into and ask more questions about.  Compare what the start-up fees are and what the realistic expected income is and determine when you will break even.  Then determine if it is an appropriate turn around time that you are comfortable with.

 

• What are the periodic costs (monthly/annual fees, required material updates, etc.)?  What do you get for these periodic costs?

 

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  • Some direct sales companies have a monthly or annual fee to remain active.  If this is the case, find out what the frequency and cost of those periodic fees as well as what you get in return for those fees. Others have “training” materials that you will be required to purchase.  Find out what those materials are, their cost, and frequency of purchase.  If the company you are looking at utilizes dated catalogs, brochures, or other materials find out how often they are changed (making your old stock to be outdated and requiring you to purchase updated materials).  You need to determine whether you will be able to absorb these periodic costs and still make a respectable income, or will these fees eat up any and all, or more than, your expected income for that time period.

 

• Are you expected to carry inventory?

 

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  • If the company you are looking at signing up with is product driven, as many are, inventory can be an issue.  It is always a good idea to maintain some inventory for those “have to have right now” needs of your customers.  However, you need to determine if you will be expected to carry a certain inventory level of product and what that level would be.  This can pose two problems if this is the case.  First, you need to determine if you have the necessary storage space for the product.  Some products have specific temperature needs or can be large in size.  Also, think if you have a safe place where the product or its packaging can be stored because no one wants to purchase damaged goods.  The second is again about money.  Find out what it will cost to maintain that inventory and what the quantity requirements are for ordering.  If you only need one or two of an item, will you have to order a case of twelve or more?  Is there a minimum order amount to replenish your inventory causing you to purchase more than you need? 

 

• Is there a monthly personal purchase/shipment requirement?

 

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  • Find out whether there is an automatic drop shipment of product that will be sent to you regardless of whether you want it or need it.  If so, learn what the cost associated with it will be and how often it occurs as well as whether you get to choose the product that will be sent to you or if it is pre-determined by the company.  As always, look at whether will this eat up your expected income.

 

• What are the costs for additional forms, catalogs, etc. that you need to be successful?

 

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  • Like any business there are supplies that are needed to be successful like business cards, catalogs, order forms, etc.  Determine what you need to be successful.  Make one list of “must have” and one of “would like but not necessary”.  Decide what you are willing to spend and once your list of “must have” has been purchased then go to your “would like but not necessary” list.  Look at the costs of the supplies and figure out whether the supply costs are reasonable.  Some companies use this to pad their bottom line and are not the cheapest place to go.  Find out if you are required to go through the company you are looking into in order to purchase the needed supplies or can you go through someone else that is less expensive.  Always look at what the costs will potentially be and see how that fits in with your expected income.

 

• Do they offer a website hosting service?  What does it cost?

 

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  • Some offer website hosting and some don’t.  Those that do generally have a preset website template that they use and you can purchase a replicated site that is hosted by the company for a monthly fee.  These sites are updated automatically with information, have the catalog available, and the ability to purchase directly on the website with you getting credit for the order.  Unless the fee for having their replicated site is excessive, this is one expense where the benefit can really exceed the cost.  Also find out about the company’s internet and social media restrictions and regulations.  What can and can’t you do in cyberspace could really go a long ways in helping or hindering your ability to grow your business. 

 

• What are the monthly/quarterly/annual sales/recruiting requirements?

 

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  • This is an area where the majority of people get in trouble.  Ask what the sales and recruiting requirements are and closely look at your ability to meet these requirements.  Many companies have some kind of grace period in order to let you get situated to the point that you can be successful.  If you don’t think you can meet these requirements in the required timeframe, then don’t sign up because you will just be throwing your money away.  Another question to ask is what would happen if you missed the required goal.  Will you get terminated, suspended, or some other punitive action take place?  Should a situation beyond your control keep you from meeting these requirements for the period, will they flexible and work with you?  

 

• What are the benefits of having recruits under you?  What are the requirements to benefit from your recruits?

 

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  • All direct sales companies survive through the recruiting of their representatives.  What you need to find out is what the benefits of having recruits under you are; those that are under you are called your down line.  You need to know if it helps you get “promoted” to a different level of compensation, do you get a residual from their sales volume, or is there some other tangible benefit.  The other piece of information you need regarding recruiting is what are the requirements you need to meet in order to benefit from anyone you have recruited.  Some companies require you to reach a certain sales volume or other benchmark for you to benefit from your down line.  Also, pay attention to how your upline gets paid- do they get paid more than you do?  If so, for how long and how is that explained by the company?  These are tough questions, but if you find an answer you are not comfortable with, the research is well worth your time. 

 

• What kind of support can you expect from the company/recruiter?

 

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  • Coming in new to the business training and mentoring should be a major concern for you.  Ask up front what can be expected in helping you get set up and started so you can be successful.  Many times the company offers good training but there is a lack of follow through by the recruiter.  If you have doubts, ask the person trying to recruit you to provide some names that you can contact to discuss this issue with some of their current down line.  If the person trying to recruit you refuses, that may be an indicator that you should really consider in your decision whether to sign up or not.  There is no guarantee that good reviews from your potential recruiter’s down line will translate into reality, however, it can give you a good picture.  This can be hard, but it is your money and every effort should be made to help you be successful.  Another question to have answered is how long your recruiter has been with the company and how many they have in their down line.  This can provide useful information as well.  Look at the excitement and motivational level that the recruiter is putting out.  It is tough to convincingly fake excitement and motivation.  This too can be an indicator of the level of support that you may receive from your recruiter should you decide to join.

 

• Are there any required meetings or conference calls to attend?  If so, when and how often?  If they are in person meetings, where do they meet?  Does this fit into you schedule?  If required, how flexible is the company about attendance?

 

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  • Even though you will be an independent contractor, there may be meetings, conference calls, and conventions that you are expected or encouraged to be in attendance at.  How many meetings per month/quarter are there? What are the meetings about? Are they going to be productive in nature?  Consider how this fits into your schedule.  Learn where these meetings are and how much travel time it will take to attend them.  Find out if there are any costs associated with the meetings you would have to attend.  This will also cut into your bottom line.

 

• What is the reputation of the company?

 

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  • Do your research.  Google the company and see what comes up.  Look at the company website.  Get a gut feeling about the company’s reputation.  If your research leaves you with concerns, talk to your recruiter about it.  Ask those you know whether or not they have heard of the company and what their experience or perception of the company is.  This is a good time to make a realistic evaluation of what your chances to be successful are.  As a new consultant/distributor, your family and friends are typically the first place you take your new business.  Should the response come back negative or less than enthusiastic then take that into consideration when making your decision.

 

• How believable are their claims of income potential?

 

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  • One thing that you will hear quite often from someone trying to recruit you is how much they make.  While this may be true, question them about it.  Ask if the income figure they are giving you is a consistent amount or is it cyclical.  Ask how long it took and what they had to do to get there.  Always keep in mind that results vary and you may not get there as quickly as they did.  But on the other hand you may do it more quickly.  If the person trying to recruit you tells you that they aren’t making a killing but they know some who are, find out why.  What is the other person doing to be that successful that your recruiter is not?  Is it because of time in the company and the size of their down line, or is it because your recruiter is happy at the level they are at?  It may also be due to a lack of competition for the one and market saturation for the other.  This information may be an indicator that you need to look at in your decision making process.

 

• How many are already signed up and active in your area?  Is it small enough for you to be successful or is the area saturated with representatives?

 

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  • Find out the saturation level in your area.  Are there few enough that you feel comfortable about your chances of success?  Or, are you competing with a large number of other representatives in an attempt to succeed?  Ask the recruiter what the turnover rate is, and approximately how many in the area are actively promoting the company.

 

• Do you know anyone else that is representing the same company, or a similar company, you are looking at?  How well are they doing it?  Would their network of customers interfere with your ability to build you customer/recruit base?

 

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  • If the answer is yes, think of why you are contemplating signing up under this person.  Compare the story that you are getting from the person recruiting you and what you know about the successes of the person or people that you know who are involved in the same company.  Are they doing better, worse, or the same as what you have heard from your recruiter?  If not, why?  If you do know someone that is involved with the same company, or a similar company, how will this effect your potential customer/recruit base?  If there is to be a great deal of overlap that could be an issue in regards to your success as well as the relationship you have with those who are involved as well.  But also keep in mind that your business won’t really start to grow until you branch outside of your direct family and friends.

 

• Is the product line something you use/enjoy/believe in?

 

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  • Just because you think that the product or service of the company you are being recruited to join will sell well, that doesn’t mean a thing if you don’t truly believe in it yourself.  People will see right through you if you are not sold on what you are offering them.  For example, if you have sensitivity to strong smells and you sign up for a company that sells a fragrant product this can be a problem regardless of the money making potential.  If you don’t use the product or service yourself, how can you truly know how wonderful it is? It will be extremely difficult for you to successfully promote the product.  However, if it is something that you use, enjoy, and believe in then it is much easier and more probable that you will be successful in it.  Why?  Because your heart is in it and you will be much more persuasive and enthusiastic in your sales pitch and people will see that and make them more willing to purchase and use it.

 

• Are you being pressured to join quickly?

 

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  • If so, why?  What would the difference be between signing up right now and in a day or two after you had time to think about it?  There is usually a reason behind the pressure applied; the trick is to find out what it is.  Could this person be receiving pressure from someone above them?  Are they desperate to get a recruit to meet some goal?  Or is this normal for them?  One thing to consider should you feel like you are being pressured is what it will be like having this person be above you in the organization.  Will there be continual pressure concerning your sales and recruiting numbers regardless of your personal goals and abilities?  Pressure generally comes from a concern for self rather than for the person being pressured.  If you are not ready to sign on the dotted line then stand your ground and don’t be pressured into something you are not ready for.  If it is the right thing for you to do, a day or two won’t change that.

 

• Does the company have an advancement matrix and what does it look like?

 

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  • Most companies have some sort of advancement.  This is one way to increase your income over time as you grow in both sales and down line.  Find out what it is and what it takes to advance.  Is it attainable to achieve?  Is it something you personally can realistically do?  It should not be easy to obtain advancement along the matrix but it should also not be so difficult that only the top people are benefiting from it.

Congratulations!  You've made it to the end!  Now I'm sure we left out a question or two, so feel free to add your comments!  Happy business opportunity hunting!  (Ok...I have to add a plug here...if you are interested in learning more about the business opportunity I chose, just let me know!)

 

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