Selling clothing, housewares, beauty products and other goods through in-home parties and one-on-one consultations can be big business for entrepreneurs and moonlighters alike. Last year, the 16.1 million direct sales representatives working in the United States generated $28.3 billion in revenue, according to the Direct Selling Association (DSA), a national trade group.
Take Elvi Valenzuela, for example. Like many recession casualties, the 27-year-old Edison, N.J.-based car salesman, working entirely on commission, saw his income slow to a trickle in 2008. Valenzuela agreed to join his mother in selling women's cosmetics at house parties for JAFRA Cosmetics International, Inc., the direct sales firm she has been working with for more than a decade. Less than two years later, he’s bringing in $12,000 in monthly sales and has received a $40,000 Mercedes from JAFRA in recognition of his efforts.
But despite what some evangelists tell their recruits, most direct sellers don't come close to the numbers produced by Valenzuela, who works at least 40 hours a week. The DSA reports that roughly 90 percent of direct sellers are moonlighters who, by choice, work only part-time.
So, what does it take to make it in the direct sales world? How can a newbie tell the legit opportunities from the bogus ones? Here's what to consider before jumping in.
Be Realistic about Sales
Most direct selling companies pay representatives commission on their own sales and on the sales of any reps they recruit (as well as the sales of their recruits' recruits) -- hence the moniker "multilevel marketing," or "MLM." As a result, a common complaint is that representatives, in their zeal to sign up new recruits, skew toward the hyperbolic, promising five- and six-figure revenues that multiply exponentially while you sleep. But that’s usually not the reality.
The median income for direct sellers is about $2,400 a year, according to DSA spokesperson Amy Robinson. Valenzuela, for instance, spent nearly two years as a full-time direct seller before he was able to match the $45,000 gross annual income he made at the height of his stint as a car salesperson.
Other five- and six-figure success stories exist, but they're rare. Just 8 percent of direct sales reps gross more than $50,000 in annual income, the DSA says.
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Researching direct sales opportunities
A number of online resources can help you learn more about MLMs and steer clear of scams. A few to get you started: Direct Selling Association The go-to source for U.S. direct selling practices and ethics. Direct Selling 411 Helpful FAQs and glossary for would-be direct sellers. World Federation of Direct Selling Associations Trade association of national direct selling associations throughout the world. HomePartyPlanNetwork Tips and community support for would-be direct sellers. |
Set Your Own Hours
To be fair, many people don't enter the direct sales market looking for a full-time job. Instead, most are moonlighters who are looking for supplemental income. They usually work only about 10 hours per week, Robinson says.
Leanne Sabo, 49, of Lakewood, Calif., thrives by setting her own hours, including early mornings, nights and weekends. "I was able to make an income that allowed me to stay home with my kids instead of going to a job," says Sabo, who grosses as much as $50,000 annually as a direct seller. "With a job," she adds, "you go to work and always make the same amount of money. But with direct sales, you create residual income. You work smarter, not harder."
Equally appealing as the flexible hours are the low startup costs. Take Jockey Person to Person, Inc. (Jockey P2P), the five-year-old direct sales division of underwear maker Jockey International, Inc., which Sabo currently sells for. The startup investment is $199, which covers samples for the rep’s first party. After that, products can be purchased at a 25 percent to 50 percent discount, depending on how many recruits a rep brings into the company.
Weed Out the Scams
Not all direct sales companies are honest. Pyramid schemes and other bogus opportunities are common.
Red flags to watch out for include direct selling revenues that are exclusively dependent on recruiting people instead of selling products. Another warning sign is recruiters who are unwilling to share details of the compensation plan. Likewise, your initial investment should immediately yield something tangible, be it product samples or training and marketing materials, the DSA's Robinson says. Getting started shouldn’t cost you thousands of dollars.
Robinson also recommends that you make sure the direct sales company has a buy-back policy, meaning that it should refund you for any unused or undamaged inventory you've purchased if you decide to quit.
Perhaps the biggest misconception is that you can get rich in a matter of weeks or months without lifting a finger or selling anything. Nothing could be further from the truth. Like any business, you have to hustle for each and every dollar you make.
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Comments:
Hi Katie.. You have some valid points.. I am sorry to hear that you were laid off but that is a reality check for many people today. I too can relate because the same happen to me with various companies i worked at and then was laid off. So have you started your home based business yet?
Great article and awesome reality check about the Direct Sales Industry. It does take time and effort but working part-time people can and do earn substantial incomes. Watch out for all the hype about easy road to quick riches. Make sure not to base your decision solely on the compensation plan. Many times people start a direct sales business based solely on the compensation plan and amount of money one can make. This is a huge mistake and although compensation is important, this should not be the only reason to start the business. In my experience one must believe in the product or service and then get passionate about how you can help people with your product and service. This mentality will increase your chances at success and get you through the ups and downs of business. If you are looking for a legitimate home based business visit my site at www.workingwithxavier.com or sign up at www. provenonlinemarketingsystem.net for more information. Good Luck on Your Search
I can say the same I have never made the amount of income only working around 25-35 hrs a week. I just sell cable services. I make more than friends with college degrees (4 year).
Great info! For those looking to start out spare time check out www.StartBusinessSite.com. Start Business Site has some great tips to keep you motivated and some cool recommendations.
I just got started with direct sales in December 2010. I became profitable during my first month, and I've been profit ever since. The reason I started is because the company I'm affiliated with pays me residuals, and I don't have to recruit anyone to get it. I also work as a real estate agent, which is 100% active income and dependent on too many other factors to be relied upon as steady income. I'm grateful for my direct selling business, and I plan to work it as long as I can.
Good basic article. Yet, when you're in "business development" or sales it almost always becomes "direct sales." Attitude and consistency is vital to develop a consistent income.
Direct sales with leveraged passive income, strength's and weakness's are right next to each other. As a practicing attorney, I still trade time for money, even though it's $250 hr or more. Residual income from a direct sales team within a solid proven company with low market penetration and slow, steady growth can't be beat. It's so easy to do and so easy NOT to do. This dynamic keeps the passionate, willing, and system based people as the minority of successful within the company. The failure rate is identical to brick and mortar start-ups. One big difference; start-up cost and overhead.
I get over the hump by having a product that I really use.I could not ask for a better way to make money and to be able to create an income for my self. I also look at direct sales as a long term investment. I look on here and I see some people that have been into direct sales for more then ten years. My goal is to be able to use the product and provide outstanding service. www.dlee.hometec.com
What about walking from business to business? I'm thinking of going door to door to businesses are they just open and don't have customer traffic and introduce myself.
Direct sales is a great opportunity for personal development and to make good money. You should not think of direct sales like a regular 8 hr job. That is like comparing apples to oranges. The article mentioned the percentage of people making more than $50,000. Guess what, I have a college degree in accounting and have worked for more than 20 years at three different jobs and still did not make near $50,000. If I had put as much energy in a direct sales position as I did at my accounting jobs, I know that I would now be making more than $50,000 and not laid off for over a year. Non-direct sales jobs are no guarantee of making money or having job satisfaction.
I agree, hard work or smart work but WORK is a must !!! And false commitment to be avoided by all means.Transperancy pays for long term relationship in this business.
I agree, like any other business this too requires hard and planned work consistently. People who dream of making instantly quick money should stay away from any business. No pain No gain. No Risk No Profit.
i love direct selling
If you remember to treat it like a business and not a hobby, you can achieve the level of success you desire, but like anything in life, you get out of it what you put into it.
I have a number of friends who do well doing in home demos with Pampered Chef and Tasetfully Simple...selling in home is not my gig but they seem to love it and do well.
Mr. Valuenzela is just one of many who have succeeded in direct sales. Of course, over 50% of people who get involved quit in the first year. But that's just about the same statistics for real estate agents who invest money and several weeks in the training and testing required to get there. There are thousands of ways to start a business with little money invested upfront - direct sales is just one of them. And in direct sales as in all businesses, it's the amount of thought, planning, effort, skill, and time devoted to the business that determines your success. http://1000waystostartabusiness.tumblr.com/
Direct Sales is a viable business where you can make $500, $1000, $2,000 a month or more! It's like every other business you start. It takes hard work, dedication, commitment and perseverance.
Re Dr. Toth I agree the highlight should be upon Mr. Valenzuela's hard work and dedication to this effort. He really turn a negative situation into a positive one.
This article really strikes home. I am in Direct Sales, and while it is very difficult for me because I have a husband with a crazy work schedule and 2 kids, 5 & 1, that are home with me all day, if you put in hard work, it can be very rewarding. It's not just the income that makes it worthwhile, but if you're working with a company that your passionate about, it really makes a big difference in how you feel about yourself!
I completely agree. You must have the passion to help others and a system to plug them into..these is not a selling business but a people helping people business. When you figure that out..you will be successful for the long term.
I have been in direct sales for 17 years and have managed always pay the mortgage working part time around my busy schedule with three children. I am responsible for a big chunk of our income and have earned the use of 8 cars and lots of extras. It isn't for everyone but it does provide a great means of income and the perks of tax deductions and business growth for those who enjoy people and are willing to do the WORK!
Awesome example of hard work and dedication!! Mr.Valenzuela was able to replace and exceed his $45k income in just two years. In today's economy Direct Sales is a very viable alternative....way better than going back to school for two years, paying money to do so and then starting over from scratch. I know for a fact he's put up with a a lot of guff, ridicule and rejection in the process and I'll bet he would say it was worth it!! I do! Live With Intention, DrBillToth.com/blog