Direct sales is not an easy business, but the potential for profit is literally limitless, with The World Federation of Direct Sales reported that on average $114 billion was generated by its members annually.
With products ranging from personal insurance policies to health foods and supplements regularly using direct sales forces to drive sales, if you have a flair for sales and the ability to convince customers and motivate and inspire a team, a direct sales business could be just what you need.
If you succeed in this business you’ll be traveling, potentially all over the country, with a team of professionals dedicated to generating cash for your business.
Sound interesting? Read on.
Step 1: Register and Get Licensed
Since most of what you’ll be doing as a sales team are cold calling, including approaching people in the street and sometimes their businesses and homes, you will likely need a ‘hawker’ license to be allowed to operate legally.
Most states have their own body which grants licenses, and you may need a police background check and clearance if operating near schools or government facilities. Always do your research ahead of time and check how to keep things legal in the area you’re operating in.
If you decide to travel with your team to another state to expand your customer base, never assume the rules in one state apply to another. Always check, and check again.
Step 2: Source a Range of Products
You and your team could be selling anything from intangible paper based products like insurance policies to actual physical goods and services like gadgets, makeup, and apparel. You need to contact and establish relationships with suppliers and remember that the bigger and better known the brand, the more success you’ll have in converting customers.
You may have to start small and establish a reputation before big companies which utilize direct sales forces will work with you. Companies like AXA Insurance and some big name telecommunications companies like Sprint use direct sales forces to drive sales, but they’re unlikely to work with you until you’ve got a reputation for trust and a proven track record.
If you want to independently source your own products, look on wholesale supply sites like Alibaba.com for products which you can buy in bulk and sell for a profit. When running the numbers remember that direct sales agents will be paid a commission on every sale and it is customary for the company to cover expenses related to travel, so the product needs to offer high enough margins for you to make a profit after you pay them their share.
If you decide to source products abroad, here are a few things to consider:
- Will the supplier cut prices if you buy in bulk? In some cultures this is acceptable, in others, it is not. Be sure to know who you are dealing with and the business norms of that culture or you could miss out on valuable discounts and opportunities. Knowing how to negotiate in the culture of the person you are dealing with can pay off dividends.
- Will the supplier provide a sample? Unless you are willing to fly to the source and check it out you are taking a gamble when it comes to product quality. Be sure to ask for a sample before committing to buy a larger amount.
- Are there suppliers in countries which have a free trade agreement with your country? Buying something for slightly less in one country could actually turn out to be more expensive after you pay taxes and tariffs back home. Do your research and see where you can capitalize by doing business in a certain country or region under a free trade deal.
- How much will shipping and storage cost? When it comes to physical products you will have shipping and storage costs. Calculate these before you make any deal and consider insurance in case shipping problems occur.
- Is the product portable? You can’t have sales agent lugging around heavy, bulky items. Looks for products which are light and easy to travel with so that your agents can both carry samples while canvassing for sales.
Step 3: Put Together a Team
Every sales recruiter will testify that there are no perfect criteria for finding talent in this business. Being a sales superstar is often down to sheer force of personality, and a high school dropout with charm and wit can often run rings around a marketing graduate who looks great on paper.
Recruit agents on social networking sites, at job fairs, through jobs ads and in through recruitment agencies. It’s always best to hold face to face interviews as you’ll get a good ‘gut feeling’ for whether the candidate has got the gift or not. Some can be trained, but a truly excellent salesperson has something natural and you want to recruit that talent when you find it.
Most direct sales companies pay on commission only. You’ll have to work out the terms with your team and make sure they understand that they will only be paid per sale. Gifted salespeople will not be intimidated by this, whereas those who are unsure of their ability may not like the sound of it. This in itself is a good screening process.
Once you have a team with enough sales agents to cover the area you want to sell in, it’s time for the next step – launch!
Pro Tip: Many direct sales firms hire agents as self-employed, independent contractors. While it’s customary for the business to handle travel expenses such as bus/train tickets to venues, gas costs, and hotels if needed, agents normally operate on a casual basis and are not formal employees of the company. Since this is a high turnover business in terms of staff, you want to leave as much flexibility as possible when it comes time to both promote and to let people go.
Step 4: Launch and Sell, Sell, Sell!
You can choose to either be out there with your team at venues and in the streets, or to stay at the office and direct them on their day to day sales quests from afar.
As sales begin to roll in you need to reward performance with bonuses and recognition, and you need to quickly weed out those who aren’t delivering. This will quickly cause your team to take shape and before long you’ll have a well-oiled, high-performance sales machine which delivers profits on a daily basis.
As you gain confidence that this business actually is highly profitable due to the low costs of starting and running it, you can look to expand your product range and reach out to new areas further afield to expand sales and fuel growth.
Summary: How to Start a Direct Sales Business
The direct sales business isn’t for everyone. It takes grit, determination and will to face down the tough days when numbers are low and the team is demoralized.
That said, startup costs are often extremely low compared to other businesses and when you find the right product and the right people, the sky is the limit!
Who wants a piece of a $114 billion pie? It’s yours for the taking if you build the right team.