Money & Career

5 things you should know before starting a direct selling business

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Money & Career

5 things you should know before starting a direct selling business

You're at a party chatting, snack-ing and watching a demo of a super salad spinner. Afterward, you order kitchen gadgets from a woman who smiles and says, "I love this stuff. Want to sell it, too?"

Tempted? According to the Direct Sellers Association of Canada (DSA), 75-plus direct selling companies in Canada sold $2.18 billion in consumer goods last year alone. The majority of the country's more than 900,000 independent sales contractors, who sell everything from cosmetics to vitamins, are female. Some sellers are at-home moms looking to try something new while supplementing the family income. Others—around 56 percent of the independent sales force—are moonlighting on top of full-time jobs. Here's what you need to know if you want to join the party.

1. Do I need experience?
Don't have a background in business or sales? No big deal. "An entrepreneurial spirit is what matters," says Ken Mulhall, the president of DSA. "Wanting to succeed, liking people and believing in the product are important."

Johanna Thackwray-Parker, a registered massage therapist and mom of two preschoolers in Guelph, ON, already had a full plate. But a passion for a product prompted her to start direct selling Pampered Chef kitchenware and cookware.

"I'd bought the product myself and I really believed in it," she says. "I wanted to do this for fun and for a personal challenge." She bought a $195 kit containing $700 worth of products. "It was foolproof. It gave me enough to have a sales party."

Canadian company Steeped Tea also offers a $149 starter kit (valued at $350), which includes bestselling teas, a three-month website subscription, training material, a personalized newsletter, and a virtual office and shopping cart for web-based sales.

"The kit includes everything consultants need to feel welcomed and to run a business," says Tonia Jahshan, Steeped Tea founder and president, who left her sales job to throw looseleaf tea sales parties. Steeped Tea ranked 27th on the Profit 500 list of Canada's fastest growing companies this year.

2. Who are my customers?
While selling online can be lucrative, in-person parties are also popular because they offer a personal touch. At a party, a consultant is happy to let potential customers try the product and ask questions. "You don't need a large network of people to get started," says Mulhall. "It can grow through your family, friends and faith groups." Johanna's first party was hosted by her sister. "At first I felt self-conscious demonstrating the products," she says. "The more you use the products, the easier it is to sell."

Derek Hassay, assistant professor of marketing at the University of Calgary's Haskayne School of Business, says selling to friends and family is a good training ground to boost confidence, but "success comes from selling to increasingly broader circles of people who will love and benefit from the products and the education a consultant provides."

Repeat customers are good customers. Guidance from the person who recruited you also helps. "You get a ton of support," says Johanna. "I shadowed my leader's shows, and she came to my first one. Plus, I call, email and text her with questions."

3. How much can you earn?
It is really up to you. It could be between $500 and $1,000 per month for about 20 hours of work. (With setup, demonstrations, cleanup and sales data entry, each party takes about four hours.) Finding and retaining customers and building a full-time career, however, takes more time, energy and effort. That's why 
Hassay calls direct selling "microentrepreneurship."

Consultants generally earn a base commission on their sales, which varies from company to company. (It is 25 percent at Steeped Tea.) By recruiting others to sell, you typically earn a higher commission rate on their sales and on your own. "Consultants can make six-figure incomes by growing large teams and training people to do what they do," says Jahshan. One of Jahshan's top full-time consultants made $60,000 in commission last year. "At the time, she had about 250 consultants under her. She now has 600."

4. What's in it for me?
"Leaders say it's a great feeling to help someone else do well," says Jahshan. "It takes work like any other business. Nothing happens overnight. If you give it time, be patient and follow the training we provide, you can be successful." Hassay agrees that the outcome depends on the effort you make. "You can decide to work 40 hours per week and make a significant amount of money, or you can say, ‘I just want to work 12 nights to pay for our next vacation.' It's a flexible opportunity."

As for Johanna, she's happy being a part-time hobbyist for now. Business perks, like free or discounted products and her own enjoyment, help keep her going. "It's not about the money," she says. "My leader makes more money than I do, but she has a lot more responsibility and puts in more effort," notes Johanna. "For me, it is about finding the balance that works for me and my family, and incorporating all of our different interests and pursuits," she says. "I've been a massage therapist for over 20 years—who knows what I'll do next? Direct selling keeps the door open."

5. Finding a direct selling business
Ken Mulhall, president of the Direct Sellers Association of Canada (DSA), offers these tips to help find a reputable direct selling business that meets your needs.

• Visit dsa.ca. With a directory of 38 members, product descriptions and website links, this is the place to start your research.

• Ensure the company is a DSA member. Registered companies must follow a strict code of ethics and business practices.

• Ask companies that you're interested in about startup investments, support, compensation, buy-back policies, guarantees and references. Be wary of those focused on recruiting people, not selling products.

• Ask to speak to other sales contractors at the company about their experiences.

Thinking of working from home? Here are some expert tips on making the transition.
                                               
This story was originally titled "Paid To Party" in the September 2014 issue.
           
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5 things you should know before starting a direct selling business

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