In this multi-part series, Persimoney examines direct sales – the pros and cons, opportunities, strengths and weaknesses of the direct sales model.
You’re probably familiar with direct sales from the products you purchase and enjoy. Some familiar direct sales (MLM) brands include Avon, Mary Kay, Pampered Chef, Lula Roe, Lila Rose, and many others.
Women often purchase direct sales business opportunities thanks to their implied promise of easy money and work-from-home. While direct sales opportunities do provide you with the tools that you need to start a home-based business, let’s be clear: they are NOT “easy money.” There is no such thing as easy money when it comes to sales! You will have to work at a direct sales business the same way that you would work at any other retail business opportunity. You will need to put time and effort into your business: marketing, promotions, bookkeeping, operations and product knowledge, and much more.
Let’s take a look today at what constitutes a direct sales business.
What Is Direct Sales?
Direct sales is also called multi-level marketing (MLM). It is a business model that developed in the 1920s and 1930s in California with vitamin companies and the California Perfume Company, later known as Avon.
In the MLM business model, non-employee sales agents sell company-approved products. Business owners (agents) receive a commission from the sale of each product as well as from the sales of those they recruit into the company.
MLM businesses are often called pyramid schemes. This is because the sales compensation plan often looks like a pyramid with people recruited by an individual in the second level, those the second level recruits into the third, and so on. Income is then generated based both on the individual business owner’s direct sales to retail customers but on any sales those they have recruited into the company make as well.
Sales are made by referral marketing, also called word of mouth marketing. Many MLM companies offer marketing packages to their distributors (independent business owners or representatives) but you’ll have to pay for those services. The parent MLM company does its own marketing, and some, like Avon and Lularoe, have excellent brand recognition thanks to both great products and marketing. Others are relatively unknown or small and depend on their reps to spread the word.
Is an MLM or Direct Sales Business a Legitimate Business Opportunity?
Yes, for the most part. There’s nothing wrong with an MLM or direct sales business model. Many people make a great income from their MLM business. Some make a nice secondary revenue stream. My own sister-in-law, for example, owned a Pampered Chef business, and the income from this business allowed her to stay at home with her children when they were young and earn enough to pay for a nice vacation each year for the entire family.
How Does an MLM Business Work?
MLM businesses offer opportunities along the following general model:
- The parent company offers business packages, or independent business opportunities.
- An existing representative will recruit you into the company. This person is called your sponsor. They will help you learn about the products and get your business started. In return, they earn a small percent of commission from every sale that you make.
- You will pay a fee for a starter kit in the business. Starter kits vary considerably among companies. Some offer a small starter kit of products and business cards for a small fee while others have several tiers of kits.
- Plan on using the company’s products! You want to understand the products fully and the best way to do this is to use them. You’ll be more enthusiastic about selling the products if you actually use AND love them.
- Allow yourself time to set up your business, take any trainings that the company offers, and begin selling products. This will not be a get rich quick scheme; it will take months or years to develop your business and network of customers.
In our next installment, we’ll talk about the pros or positives of owning your own network marketing business. In the meantime, I invite you to leave comments about your own MLM business questions or experiences.
Please note: Persimoney is NOT selling any MLM opportunity! We present this information for awareness and educational purposes only.
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