How to Start Your Own Direct Sales Company

What is a direct sales company?

A direct sales company involves selling a product to consumers outside of the traditional retail environment. Salespeople sell directly from their home, their own online store or the customer’s house. They act as both the distributor and salesperson, as they sell their own products directly to the consumer.

In direct sales, the products’ manufacturers send the items directly to the direct sales company, who then distributes it to the sales representative to sell directly to the customers. Direct sales companies often sell unique products that aren’t available in retail stores, so customers must go to the direct sales representative to purchase that specific product.

For most direct sales companies, you act as an independent contractor and are considered a small business owner. You often market the products, invest in the inventory and sell the items yourself. Another option is to start your own direct sales entity. This entails building a new brand and product yourself, developing your unique selling proposition and recruiting sales representatives.

Benefits of starting your own direct sales company

Starting your own direct sales company allows you to be in control of when, how often and where you work. Some parents choose to run a direct sales company and work full or part-time while balancing chores and other family and personal responsibilities. Common benefits of starting your own direct sales company include:

Costs are low getting started:When you start as an independent contractor, you don’t have to pay large fees to get started like other franchise companies. A majority of your costs, in the beginning, go into your inventory, which you work to earn back as you sell to clients.
Schedules can be flexible:Since you own your own business and can usually operate from anywhere, you’re able to build your own schedule and sell whenever is most convenient for you. This is especially helpful for parents, as you’re able to work while your children are in school.
Opportunities for growth and training are available:If you decide to work with an established direct sales company, you’ll be presented with training opportunities to help you improve your sales and marketing skills, with the potential to earn a higher income.

How to determine your niche and the products you’ll sell

Research different niches to find the most profitable one. It’s also important to carefully consider possible products to sell by determining which will add value to your customers’ lives. Follow these steps to determine your company’s niche and which product to sell:

1. Think about the industry you’d like to work in

Before picking a specific product, research possible niches and industries you could go into. It’s best to pick an industry with a target audience that already regularly purchases from direct sales companies. This guarantees you’ll have plenty of customers to sell to once you get started, especially if you’re building your own product line. Popular direct sales industries that successfully sell a variety of products include:

Food, wine, tea or coffee
Makeup, cosmetics and skin-care
Clothing
Health, fitness and wellness
Home goods, candles and decor

2. Pick the product you’d like to sell

When you’ve found the niche and industry to pursue, research companies currently selling related products. Search for these companies online and read customer and employee reviews to ensure it’s a successful and legitimate organization to invest your time and money in. When you’re selecting a product, find one that excites you and adds purpose or value to your customers’ everyday lives.

If you don’t find any companies with products you’d feel passionate about selling, consider starting your own entity for others to buy into. When you find products you’d like to sell, carefully research companies in the industry to ensure your product isn’t too similar to theirs to avoid confusion and possible legal repercussions. Check the Direct Selling Association’s website to find all the current direct sales companies in the industry.

3. Establish your target audience’s need and how you’ll fulfill it

When you have a better idea of your industry and the product you’re selling, gain a better understanding of your target audience. Determine your audience’s wants, needs and desires, so you can build a marketing and sales strategy to cater your products directly to them. When you have your plan established for your target audience, you can invest your time and budget into marketing and sales tools that you’re confident will help you earn higher profits.

Estimate of how much money is needed

How much money you’ll need in the beginning depends on whether you’re starting your own direct sales entity or if you’re acting as an independent contractor and small business owner.

As an independent contractor, your primary investment will be in the sales kits, which contain your products and are around $100. You’ll also pay for smaller costs, like business cards and home office supplies. If you’re running your own entity, it costs around $20,000, depending on the products you sell and the size of your company. Other expenses you must cover include:

Inventory costs
Business cards
Marketing and advertising costs
Home office supplies and equipment
Product samples
Business licenses, permits and insurances
Recruitment and training costs

How to register your direct sales company

Before you’re able to operate as a legitimate business, you must first complete basic business registration tasks, like building your business plan, signing up for permits and choosing your business structure for tax purposes. Follow these steps to successfully register your direct sales company:

1. Build your business plan

If you’re starting your own direct sales entity, you’ll need a business plan that clearly details your business’ purpose, your plans for growth and what you need to help the business thrive. Make sure your business plan is clear, relevant and free of spelling errors, as many business professionals like shareholders, investors and your distributors will read it. An effective business plan must include:

A business summary
A description of your products and how they fulfill your customers’ needs
Your current budget and any additional funds needed
Your projected income for the next few years of operation
Your current plans and strategies for financial success

2. Select a business structure

Your business structure establishes the amount you’ll pay for taxes and which paperwork you’re required to file. The business structure that’s best for your company depends on your state’s specific regulations and whether you’re starting a new direct sales entity or becoming an independent contractor for a current one. As your business expands and you onboard new employees, the state allows you to switch to a new business structure. The two main structures to consider pursuing include:

Limited liability company:Many small businesses use this structure starting out, especially direct sales business owners. It allows you to separate your personal and business assets, essentially protecting your personal belongings and investments, in case your business experiences an unexpected financial setback. For instance, if the product you sell to customers provides them with negative side effects and they take legal action, this structure protects your personal assets, like your car, home or other investments.
Doing business as (DBA):If you’re joining an already established direct sales company, consider filing as a DBA, which allows you to do business under a name other than your own, which is the direct sales company’s name. When you register as a DBA, your state recognizes you as a sole proprietorship, which allows you to legally conduct business in your state. It doesn’t separate your personal and business assets. Consider filing for both an LLC and DBA to ensure you’re completely protected.

3. Obtain the necessary business licenses

Since you’ll be operating your business from your home, there are certain licenses you’ll need to function as a legitimate organization. To get your home business license, go to your city or county’s government website, which will list their rules and guidelines for operating a business out of your house.

It may also have a registration form for you to fill out directly from the website to conveniently apply for the license from there. Most business licenses cost around $50 to a few hundred dollars, depending on the type of business you run. After you choose a business plan, pick a relevant name for your company and product line that appeals to your target audience.

4. Purchase business insurance

The most common type of insurance most small business owners get is general liability insurance, which protects you from possible legal repercussions if someone is hurt on your property. Since you’ll have an inventory of products, consider investing in insurance that covers these items in case they’re ever lost, damaged or stolen. Possible insurance options include:

Contents insurance:This provides extra coverage for your products that your current homeowners’ insurance may be unable to protect.
Spoilage insurance:Consider using this insurance if you have products like frozen foods or cosmetics that may go bad or be destroyed in undesirable temperatures caused by instances like broken air conditioning systems or power outages.
Inland marine insurance:This covers your products if they’re broken, lost or stolen during transit or if they’re damaged off-site, like at a client’s house during a product demonstration.

5. Determine the additional permits you’ll need

There are many permits your business may need depending on the products you sell, your local or state regulations and the type of business you own. Check with your local government to learn which permits you’ll need to legally operate your business in the surrounding area. Common permits you may need for your direct sales company include:

Sales tax registration
Unemployment and worker’s compensation registrations
Weights and measures registration
Health inspection certification
Home occupation permit
Zoning waiver or permit
Fire department permit
County permit

How to hire employees

When you’re ready to hire employees to sell your products, search for quality candidates who are outgoing and are passionate about working for your company. Follow these steps to successfully recruit, interview and hire great employees:

1. Determine the skills and expertise needed

When starting your own direct sales entity, you’ll need sales representatives and other sales employees to distribute and promote your product to potential customers. Build a list of skills you’d like your salespeople to have for this role. It’s best to search for candidates who have great communication and interpersonal skills, are excellent listeners and possess an outgoing personality.

2. Recruit potential candidates

When you have your skills and expertise preferences listed, start the recruiting process. Even if you start working for a current entity as an independent contractor, you may be encouraged to recruit additional team members to sell your products as well.

Let others knowyou’re looking for additional sales employees. Talk with people you know who would enjoy your products and be passionate about selling it and encourage them to tell others about your job opportunities. Host a party or demonstration of your products and invite people via social media or email. Explain what the product is and the value it provides customers. Ask candidates to reach out to you to gain more information and talk with them further.

3. Interview and hire top employees

Once you have a list of potential candidates interested in selling your products, meet in-person to learn more about them. Ask them questions to better identify what they like about your products and why they want to sell them. Hire candidates who you believe will best represent your company, believe in your products and express enthusiasm when promoting and selling them to others.

Best ways to market your direct sales company

To effectively sell your products to customers and to get them excited to purchase your items, you’ll need to practice common marketing techniques that attract a wider target audience. Common marketing strategies to try include:

Create your website:Whether you’re starting your own direct sales entity or selling for a current one, consider building a website that displays your products in an enticing way. List your contact information, so customers know how to easily reach out to you to order products.
Host product parties and demonstrations:A great way to showcase your items is by hosting parties with interested clients and showing them your products’ features up close. Ask a friend or colleague to invite their connections to their house and host an entertaining party where you demonstrate products and answer any questions about them.
Make your own social media pages:Help your target audience more easily find you by building pages on popular social media sites. Host contests where your followers can win prizes or discounts and create other engaging and entertaining posts that receive positive engagements and interactions.

Frequently asked questions about starting your own direct sales company

Can you make money in direct sales?

You can make a significant amount of money in direct sales, especially if you dedicate a large portion of your time to building your brand and marketing your product to others. The average commission for direct sales consultants is 20% to 30%, meaning if you sold around $300 worth of products to a customer, you’d earn around $90 from a single sale.

How can I improve my direct sales business?

The most effective ways to improve your direct sales business are by regularly promoting your product to others and recruiting more enthusiastic and motivated people to join your sales team.

How do I get people to join my direct sales team?

You can get others to join your direct sales team by explaining the importance of your product and how it’ll add value to those who purchase it. People typically want to join a direct sales team if they enjoy using the product themselves and are confident that it’ll fulfill customers’ needs.

When you start your direct sales business, conduct careful research on potential products you’d like to sell and on the potential materials needed to register as a legitimate business. Once you recruit a strong team of passionate and outgoing employees to successfully sell your products, you’ll build strong customer relationships and see higher profits.

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