Direct Selling Companies – Consider the Costs of Doing Business

Many people are looking for ways to make money from home. One popular home based business model is Direct Sales. Sometimes called party plans, direct sales companies include businesses like Avon, Mary Kay, Tubberware, and Ameriplan.

Direct Sales and Party Plan Companies are also called network marketing companies. They focus not only on selling products or services, but also recruiting other salespeople into the company. These type of home based businesses are best for people with outgoing personalities who enjoy hosting parties, inviting people to events, and talking to strangers. If you decide to sell products or services for one of these companies you will usually be an independent sales representative or independent contractor, NOT an employee. You most likely will be paid commissions when you sell a product, or when someone you recruit or sponsor into the business, sells a product. If you don’t make any sales, you won’t make any money.

There are usually costs associated with doing business, and one must consider these costs prior to joining the business. There may be monthly fees to pay, which may cover your company website or national marketing campaigns. There may also be costs associated with the products you sell. The independent consultant may be required to buy the products first at a wholesale rate, then resell the product to customers at retail price, thus keeping their profit. Other companies may NOT require the independent sale representative to carry the inventory, but rather the items are drop shipped directly to the consumer. Customers may be able to order products from a company website or only from the independent representative. The independent sales rep may need to pay to marketing materials, products, samples, training courses and monthly fees.

Before joining any company, find out the actual costs that are mandatory, like a required monthly fee. Then try to get an estimate of variable costs, like advertising expenses, from an independent rep already in the business. You may also want to talk to people who have “failed” or “quit” this business. They may give you a more accurate description of the costs involved. Calculate how many products you would need to sell per month in order to just break even after your expenses are paid. If this number feasible? How many hours or parties will you need to host to meet this minimum amount of sales? Will you have additional income from the sale of products from a company website or do all product sales come from in person transactions? These are all things to consider when deciding to start a home business in direct selling or party plan type companies.

Before joining any company as a sales representative, make sure to check out their credentials with the Direct Selling Association at www.dsa.org. Also make sure to read the Better Business Bureau report on their company.