Direct Hit

No more beating around the bush--these 10 expert tips will help you create a successful direct-sales business.
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This story appears in the May 2007 issue of Entrepreneurs StartUps Magazine. Subscribe »

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?

6. Learn the selling system

Jensen says every company has a different approach to selling: Some use home parties; some use catalogs; some use cold calling or face-to-face meetings. But all, he says, have two things in common: "First, [the selling system] is duplicable. I can teach it. I can duplicate it with people in my downline. And second, it provides predictable results. That means you can expect an average number of sales or a similar level of results more times than not." Many companies that follow the direct-selling model and fail haven't thought through how their representatives will consistently sell their product to many different customers.

In addition, Leisner says, you need to harness information about existing and prospective customers. Keeping in touch with people who have bought your products in the past and reaching out to people who have shown interest in purchasing or hosting direct-selling events is essential to expanding your list of prospective customers.

7. Sell the opportunity while you sell the product. According to Jensen, only about 30 percent of direct-sales consultants sponsor a new member of their downline within the first 90 days. However, that three-month window is also when most direct-sales consultants make their decision about whether or not to continue with the company.

To get your earning power up and begin building your business, Jensen advises ramping up your sales team right away. "Time is our top competitor. Knowing that, take the time you can spend on the business and work on the business," he says. "This is a great opportunity for a lot of people. There's nowhere you can get this kind of return for working two or three hours per week, when you want. Some people are averaging over $100 per hour," Jensen says, although he adds that is not a typical level of compensation for part-time workers.

Once customers have had the opportunity to try the product and get excited about it, they're more likely to "evangelize" it, he says, spreading their enthusiasm--and selling--to people they know.

8. Market yourself. Of course, there are only so many products your family and friends can buy from you. That's why it's important to keep looking for creative ways to expand your sphere of influence, says Robinson. Look for opportunities that match what you're selling. You might want to have a booth at a craft fair or at your town's annual festival, she suggests. Jane Creed, a former executive at direct-selling giant The Pampered Chef and co-founder of Creed and Creed, an Orinda, California, global marketing and PR firm serving direct sellers, has seen successful independent reps who have set up their own websites and e-mail marketing campaigns.

There certainly are many ways to market your business, but it's important to ensure that the company is as enthusiastic about new marketing ideas as you are. Some are more conservative and prefer that you use existing marketing materials or get approval before doing anything new. "Different companies have different rules about what you can do with their marketing," Robinson says. "Some companies provide you with materials--that's great. Others have the flexibility where, if you say 'I want to try this,' they'll let you try what you want. It's about [finding] a good fit for you."

9. Keep on top of the numbers. Keohohou says successful direct sellers should regularly review how their team members are performing. If a consistently good producer is falling behind in the number or dollar value of sales being made, it may be a sign that there's something you need to address. That could mean working with the team member to build his or her own downline, to provide additional training or support, or to find solutions for cracking a tough market or finding new customers.

Jensen agrees: "No successful leader has ever achieved success in this business without being a strong manager of a group. You need to build leaders, or [the business] will all fall on your shoulders." He advises direct-sales team leaders to work with their companies to help people in the downline reach a return of $25 to $35 per hour, which he says is a compensation level that tends to keep team members from leaving the company.

10. Keep in touch. The bigger your enterprise is, the more you need to be in touch with company higher-ups to help you manage the business and ensure it's being developed properly, says Leisner. Companies have a vested interest in helping you achieve and maintain success, and it's important that you take advantage of the resources offered to help you do that.

Keohohou says many companies have back-office support for distributors, where they can get help monitoring and developing their businesses. She also advises having a regular method of keeping in touch with all the people in your downline so you can inspire and encourage them. And this will help you avoid any unpleasant surprises and make it easy for your group to communicate with you.

All the experts agree that having a passion for your product and a professional approach to your business should be at the heart of any direct-selling enterprise. Make sure you follow the same good business practices you would if you were starting your own venture from scratch. And remember, like every business, you'll get out what you put in.

Getting Down
How do you develop those six- and seven-figure downlines? It's a lot of hard work, says industry consultant Jane Creed, and you should be wary of anyone who tells you differently. Still, there are some common elements of success the experts have observed.

Adjust your expectations. Most of the people attracted to careers in direct selling aren't looking for it to be a full-time job. In fact, the Direct Selling Association has found that more than 85 percent of direct sellers spend fewer than 30 hours a week on their businesses, and Dan Jensen of direct-sales consultancy Jenetek says more than half work nine hours a week or fewer. So it's unlikely that your entire downline will be populated by powerhouses like you, intent on building sizable businesses. But creating a team of consistent sellers--even those who are just earning a few hundred dollars each month--can return considerably more than a hotshot who leaves after a couple of months.

Run your business like a business. While other sellers may be keeping less-than-bankers' hours, you need to focus and work, says Jensen. "For those who look at the big picture and see the potential of picking up the management component of this type of work, there can be great rewards," he says. That means being organized, using the proper technology to track sales and keep in touch with downline members, and watching the numbers while continually recruiting new people and promoting your products.

Stay in the market. The most successful direct-sales enterprises Creed has seen have their top people out in the marketplace, selling on a regular basis. "The top people at The Pampered Chef aren't sitting back and letting the downline do all the work," she says. "That keeps them understanding the customer."

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