How Direct Sales Works - dummies

By Belinda Ellsworth

In direct sales the products are sold by independent representatives, not employees. These salespeople purchase a business starter kit to join a direct sales company. A business starter kit typically requires a low-cost fee for materials, the details of which differ among companies.

This starter kit often includes products that you can use to display at your parties and demonstrate for your clients. The kit also includes necessary paperwork and training materials that will help you get your business off to a fantastic start. Your kit has everything you need to run a successful business. This purchase, along with signing the company’s standard agreement, sets you up as a member, or independent representative.

As a representative (or consultant, or brand ambassador, or perhaps other title, depending on the company), you are an independent contractor who works on a commission-only basis, running your own small business. Because you are truly independent, you don’t report to a supervisor. You set your own hours. You decide when, whether, or how often you will work. If you feel like it, you can increase your efforts and earn more money—in effect, giving yourself a raise—or you can pursue a more advanced job title. With direct selling, all job titles, promotions, and pay raises are based solely on production.

You are independent, yes, but you also have a built-in support system from the company and from your team. You are part of a team of other independent representatives who have a vested interest in your success—your upline. Your upline includes your sponsor, the person who helped you join the business (whom you get placed directly under in terms of organizational structure), along with other experienced people whose businesses are connected to your business through a sponsorship line.

These upline mentors can really help you. They know how to create success in the business and have sponsored many other independent representatives. They can show you how to do the same. Your access to this mentorship is built in to the direct sales business model.

In addition to being taught how to sell products, you will be trained on how to meet people outside your own personal circle to sell products to and how to introduce people to the benefits of becoming a representative as well.

You can feel comfortable turning to your upline for support because the business model pays them commissions based on the success of the people in their sponsorship line. They are eager to see you succeed and they understand the details of your business better than anyone. Your success contributes to their success, so they have an incentive to provide you access to the tools and information you need to run your business well.

With a very low starter kit purchase, direct sales offers the average person a way to earn income with an established business model and a marketable product line. It works almost like a mini-franchise without the initial investment. It can cost a new business owner tens of thousands or even millions of dollars to open a brick-and-mortar franchise like a donut shop or fast-food restaurant.

With direct sales, you benefit from your affiliation with a company that has created the concept, conducted research and development, incurred the manufacturing costs, and invested the money in starting the larger business and brand. This provides you with a low-risk opportunity to earn more money than you could realistically by starting from scratch alone.

The company also absorbs the ongoing expenses of warehousing the product, developing new products, creating marketing materials, complying with government regulations, and taking care of a number of other high-ticket costs that you’ll never even have to think about, let alone be responsible for. This arrangement removes some headaches for you and eliminates the need to hire a staff of your own or become an expert in these other areas. When things work well, representatives can focus solely on marketing the products, taking great care of their customers and teams, and recruiting new people into their teams.

So, what’s in it for the company? Independent representatives are the sales and marketing arm of the company, and the company only pays commissions for actual sales. Instead of paying for advertising and other expensive marketing, the company only pays the independent sales force after a sale has been made. That is appealing to companies, especially when they have products they believe will do better with word-of-mouth advertising and in-person demonstration.