Direct Hit

Are you ready to jump right into direct sales? Before you do, make sure you know the techniques that will help you create a successful direct-sales enterprise. Here, top industry experts weigh in on the 10 essential tips for success.

1. Know your goals. Amy M. Robinson, vice president of communications at the Direct Selling Association, says the most important first step you can take is to determine what you want to achieve. "People get involved in direct selling for many different reasons," she says. "They may be in it for a full-time career. They may want to make a few hundred or a few thousand dollars a month and keep their enterprise small." Knowing your long-term goals for your direct-sales business will help you choose a company that can support you and put you in a position to achieve those goals.

2. Understand compensation systems. Recently, Dan Jensen, founder of Jenetek, a Ridgefield, Washington, direct-sales consultancy, met a direct-sales team responsible for moving $3.2 billion in merchandise the previous year. Of course, that's not anywhere near typical--Jensen says the typical part-time representative who devotes a moderate amount of effort to his or her business earns something along the lines of $15 per hour. But Jensen says the team he surveyed understood that they had to build a great downline with hundreds of motivated individuals to get to that level of revenue.

"You need to have a clear picture of the retail profit you can obtain by selling a product," says Jensen. He points out that retail profits will range from 10 percent to 50 percent of the sale, averaging about 25 percent to 28 percent. You'll also earn lower percentages of the sales of people in your downline, and these can vary greatly from company to company. That information, coupled with the amount of the average sale--all information that should be readily available from reputable companies--can give you a better idea of the long-term income potential.

3. Pick a product you love. Don't just sign up with the company that has the best reputation, says Nicki Keohohou, CEO and co-founder of the Direct Selling Women's Alliance. Instead, pick a product you would recommend to your friends and family even if you weren't selling it.

"You need to be passionate about the product so you can share that enthusiasm with your customers," Keohohou says. If you're lukewarm about the product, customers and downline recruits will sense that, and you'll be less effective.

4. Protect yourself. Unfortunately, there are some scam artists posing as direct-sales companies, so you'll want to check out prospective opportunities carefully. Robinson says direct-sales companies that are members of the DSA must abide by a relatively stringent code of ethics governing how they deal with their salespeople and customers. She's quick to add that some nonmember companies are reputable, too.

"Even if the company is not a member, it could be a good company, but you need to do a little more legwork to be sure you're protected," Robinson advises. That includes checking the company with the Better Business Bureau as well as your state attorney general's office or department of consumer affairs to see if it has had any complaints filed against it. One mark of a reputable company is that it will have a buyback policy if you purchase products to sell and then decide the business is not the right fit for you.

5. Check the support system. Once you find out the company you're interested in is on the up-and-up, you'll want to be sure it has the support systems you'll need to build your business.

"One of the great things about direct selling is that you're in business for yourself, but not by yourself," says Jay Leisner, founder and president of Sylvina Consulting, a Portland, Oregon, firm that provides consulting services to direct-sales companies and independent direct sellers. He advises speaking with company employees and others who sell the company's wares to find out what types of training the company offers to new direct sellers. This will be particularly important as you build your downline, he says.

Other questions he advises asking include: Does the company offer incentives to reach various levels of sales or various levels of recruitment? Will it assist you with management training or help you find resources to run your business as your downline grows? Leisner recommends looking for a company with a track record of providing support to its direct-sales consultants. And if you encounter a problem with your business--from issues with merchandise returns to handling a less-than-productive team member--is there a company liaison to whom you can turn for advice and assistance?

This article was originally published in the May 2007 print edition of Entrepreneur's StartUps with the headline: Direct Hit.