We’ve all heard that you need to spend money to make money. That is true. If you plan to start a direct sales business and don’t have the financial investment to purchase a starter kit, along with a few necessities to get started, then operating a profitable business will be an uphill climb if not impossible.
They key is to balance income with expenses.
What often happens in direct sales is that for the independent consultants who are unable to balance their income/expense ratio, they end up quitting “because I’m spending more than I am making.” I sometimes get emails from team members telling me they are quitting “because they can’t afford to keep their business.” This is such a backwards mentality.
People join direct sales to make money (among a host of other reasons), not to lose money. They should be enjoying an income; and it shouldn’t cost them financially to stay in business. If they need money, then that’s all the more reason to work their business, as it’s a wonderful source of income already at their disposal.
Common financial mistakes that can be terminal to a direct sales business:
- Huge investment of inventory up front. Most starter kits should contain all you need to start a business. Sure you’ll need to invest more as you go along to grow and maintain a business. For starters, use what came in your kit. Then use a portion of your pay check to reinvest back into your business to purchase additional stock, marketing collateral or display items. Many direct sales companies also allow the consultant to also be the host to take advantage of the host rewards. This is a cost effective method to grow your inventory.
- Giving away the farm. Newer consultants are sometimes dismayed when they announce their grand opening and then the orders don’t come as abundantly as envisioned. Instead of keep on keeping on and working their business with a system that has been proven to work, they want to take the express elevator to the top. What I mean is they start issuing bribes to get recruits and hosts. Join my team and I will give you xyz. Host a party with me and in addition to the corporate host rewards, I’ll give you an extra [product]. Those are all items that come out of their profit margins. Any profits earned at the party or event will/can be eaten up in the extra giveaways the consultant had to fund out of her own pocket. [Read more…] about Deadly Financial Mistakes in Direct Sales