If you want to minimize overhead expenses, increase sales, make profit and also maintain long-lasting relationships with your customers, the direct sales method is the way to go.
Direct sales, also referred to as direct selling, is a strategy where middlemen are eliminated and sales representatives help to get products directly to consumers. This business model is employed by several companies such as Herbalife nutrition, Usborne books,Young Living, Scentsy, and many others.
In this article, work has been done to bring together the important steps to take if you want to start your own direct sales company. Many people choose this type of business as it is flexible and can be done from anywhere; this makes it one of the popular work-from-home jobs for stay-at-home moms.
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So, if you want to find out how to start a direct sales company that will be highly successful, keep reading.
What Is A Direct Sales Company
A direct sales company is a business that allows sellers or distributors to work from locations of their choice be it their homes or any non-retail location with the intention of selling products directly to its users. The term multi-level marketing is also used in place of it.
How it works;
A direct sales company receives products directly from manufacturers and connects with sales representatives who sell the products to consumers directly.
Most of the time, the products traded cannot be purchased in retail stores making it impossible for consumers to have an alternative place for purchasing that particular product. This privilege that direct sales companies enjoy has contributed to its growth.
Sales representatives are paid commission on sales made which implies that more sales equal more money.
How To Start A Direct Sales Company
Having a direct sales company may mean you are a consultant for an already existing direct sales company or you set up yours from the scratch. Whichever one you choose, the focus is still on getting your goods directly to its consumers.
Here is a detailed guide on how to start a direct sales company
Understand The Industry
The direct sales industry is one that you need to understand its operations for you to know what to expect and how to overcome the challenges that may accompany it. This can be done by under-studying the companies that have been in the business for years.
One of the ways to learn from these companies is by aligning yourself with them for a while so as to gather relevant knowledge.
You can also hire experts in the industry to assist in the management of your company.
Also, there are training courses that can also help in building you, making you fit to run the company.
Here, you also decide if you want to start your own company or you would like to align with an existing company. If you choose to start up your sales company, you can either hire an expert or go through the necessary training to help you start right. This also applies if you want to work with existing companies.
Obtain The Required Licenses
Every business established whether it has a physical structure or not needs licenses that must be obtained for legal operation. This is also applicable to direct selling and must be put into consideration when thinking of how to start a direct sales company.
The licenses depends on the type of product involved but some of the major permits that must be obtained by a direct sales company are;
- Health inspection certification
- Weights and measures registration
- Home occupation permit
- Zoning permit
- Sales tax registration
Get Your Business Insurance
This will cover for situations when you get hurt by someone and experience a form of loss in business due to occurrences beyond your control.
A business insurance may be spoilage insurance, contents insurance, or inland marine insurance.
Spoilage insurance is suitable for you if you are into products that can easily go bad when exposed to certain unfavorable conditions while contents insurance provides coverage to areas your homeowners do not make provision for and inland marine insurance covers you when there is a loss where goods is on transit
Write Out Your Mission
Your mission is that plan which you are set to achieve through direct selling. Identify a need and try to solve it through the products or services you will be providing. This will be your selling point and convince your potential clients that you are not just in business to make money but to help bring a solution to a problem.
The Type Of Product/Niche
This is very important and can be regarded as one of the major things required when considering how to start a direct sales company.
Your mission will guide you into selecting the best products that will solve the problem you discovered and so before you embark on setting up a direct selling company, you must have considered the type of product you want to settle for.
In addition to this, not all goods sell the same way. Some goods may not require persuasion before you get your potential customers to buy while you may need a lot of follow-ups before you can convince an individual to purchase a unit of another product.
Also, the profit margin on products differ, and this is also important to consider because it can help you make a better decision when selecting the products you will be selling.
Also, you must ensure that there are potential sales representatives in the locations where the product will be needed the most.
Know Your Competitors
After selecting the products that you want to sell, identify competitors of the product. You might ask why? This is because despite the uniqueness of your product, there are still other products that it will compete with in the industry.
So it is important that you understand how your competitors’ sales representatives are being supported to ensure the sale of their products, then you can employ their strategies and where possible, improve on the techniques that are being used to increase sales and retain customers.
This is very important. Even though you will be using sales representatives, you must still figure out a means of getting the consumers of your products to become aware of them. This would make it easier for yout sales reps to close sales as the consumers will already have an idea of the product before being approached. Remember that it is only when you are making sales and when you keep selling that you can remain in business.
Make use of social media platforms, promotional posts, newsletters, and other ad strategies.
Understand Likely Challenges
Some of the challenges you should expect include;
- Unfavorable government policies
- Purchasing power on potential consumers
- Competition from other brands
Select Few Products
It is good to start by selling a few fast-moving products that will make it possible to turn over your money quickly instead of having it tied down. This way, you are able to acquire more of these goods at a reduced cost.
Also, as your knowledge of the trade and your capital increase, you can include other fast-moving products.
Advantages Of A Direct Sales Company
The following are some of the major benefits of direct selling:
Whether you choose to work as a sales consultant, representing a direct sales company, or set up yours, you are open to select as many products as you want to sell.
Products Are Available
One of the advantages of a direct sales company is that, you don’t necessarily have to create your products, you can simply deal in existing products produced by other manufacturers and agree on terms that suit both parties.
Low Start-Up Capital
Starting a direct sales company is cheaper than you can imagine. You don’t require so much when compared to opening a store. It is so easy that with only $200 you are good to go if you want to start as a sales consultant for an existing direct sales company
In addition to this, you can start making money almost immediately especially when you deal in fast-moving goods.
Returns On Investment (ROI)
The entire time and money invested comes back to you and you enjoy the total returns, since you are your own boss. Knowing this, you can map out how much you want to earn from the business.
Relating with customers one on one will help you to understand their needs and with that, you know how to personalize your products and services to give them that unique experience. This way you are able to serve them well.
You can create your work and success plan since you are not under pressure to report to anyone. You may choose to work part-time or take it up as a full time.
As a beginner, you may want to consider it as part-time so that you are able to build the business without taking money out of it, since you have an alternate source of income. Once you are able to stand firm, working full time can be considered.
You can also choose to work from anywhere; this makes it easier for you to combine with other jobs.
Check out other advantages of direct selling.
Disadvantages Of Direct Sales Company
This challenge is born out of the elimination of middlemen which reduces the reach of the seller.
The presence of middlemen helps a product to reach more people faster since several individuals are involved in the distribution. Eliminating middlemen will reduce reach which will affect the sales level and in turn lower the profit.
Distribution Cost and Expenses
There are expenses associated with getting the products across to the consumers. Examples of these include phone charges, shipping expenses, website maintenance, order tracking, software maintenance, and credit card processing fees.
Focus On Sales Volume
Sellers often focus on the quantity they are able to sell because of the huge bonuses instead of the satisfaction of the consumers. This focus on quantity over quality/customer satisfaction can lead to a reduction in sales in the long run which will also have a negative effect on the profit.
Although it is flexible and allows you to work from anywhere and even combine it with other jobs, the reality is that for you to get the best out of it, you will need to spend time searching for new customers and also following them up.
This implies that for you to get the best out of this selling method, you might need to go full time.
Frequently Asked Questions
- Should I Ship In Bulk Or Outsource?
It is advisable to partner with other distributors when starting. With this, you will be able to gather the necessary shipping experience that will guide you when you start operating on your own.
- When Can I Introduce Free Shipping?
You can introduce free shipping to encourage more purchases of your product. This can be done by setting a target, and as many of your customers that can meet that target or exceed it can enjoy such privileges.
- Is Direct Selling A Pyramid Scheme?
The pyramid scheme is an illegal way of raising money by encouraging more investors who also recruit investors and keep going on and on, without necessarily selling products. This is different from direct selling.
- Is It A Viable Career?
Several have been in the industry for years and are still in it making waves so taking it as a career is an excellent decision.
- Can I Experiment With Direct Selling?
To start direct selling does not require large capital. So in case you are not certain of its reliability, you can try it out with as low as $200
- When Is The Best Time To Launch Out?
You can target a timed event like Black Friday for your launch-out.
- What Products Are Commonly Sold?
Products that are often sold in the direct sales industry are beauty, supplements, and food products.
The survival of a business is measured by how it can get its products to reach the final consumers at a reduced rate, and one of the ways to achieve this is through direct selling.
Understanding how to start a direct sales company will give you an edge in the business. So, whether you choose to work as a consultant for a direct sales company or you want to set up yours, the information provided above is detailed enough to guide you through your journey and guarantee great success.