6 Things to Consider Before Starting a Direct Sales Business

Many work-at-home parents try their hands at direct selling as a way to pick up some cash while still spending time with their kids. A direct sales business can, indeed, provide a parent the best of both worlds: flexible hours and income. However, be careful. Direct sales can be a front for work-at-home scams, but more than that, you will want to carefully consider whether you will like direct sales. After that, look into some of the business issues outlined below and learn the direct sales industry's terminology before you make any commitments.

And keep in mind that there are other types of sales jobs that can be done from home. 

The Product

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First and foremost, do you love the product? If the answer is not an unqualified yes, look for a different product for your direct sales business. There are so many choices in direct sales businesses that you should be able to find a product you can get excited about.

But try to be critical too. What are the drawbacks of this product? You need to know this to overcome objections. Also, critically evaluating a product before entering into a ​direct sales business will help you avoid work at home scams or pyramid schemes. Typically scams offer low-quality products and focus on recruitment.​​

Start-Up Costs

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The beauty of a direct sales business is that this is an industry with fairly low start-up costs. Typically you must buy a sales kit, which can often be less than $100. You may also need to purchase sales aids, business cards, etc. But relative to many other home businesses, costs are low. However, if there are training costs and/or unexplained fees, beware; this could be the sign of a scam.

Keep in mind, though, that the start-up costs for a direct sales business go beyond simply the initial sales kit. You may need to invest in some infrastructure for your business. Home office equipment, cell phone, business phone, business cards, appropriate clothes, and samples of the product are just a few of your possible initial costs.

Ongoing Costs/Cash Flow

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And just like any other business, your direct sales business will have ongoing costs. Expect to pay for gasoline, cell phone and internet charges, paper and toner, gifts for clients, interest on items purchased on credit, childcare costs, etc. Plus you have to pay for inventory. Yes, you will likely make back what you invest in inventory, but be sure you have adequate cash flow to cover this investment.

Return on Investment

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How much inventory will you have to sell to make a profit? And is the profit enough to cover the time and money you have invested in your direct sales business? You may not have a clear idea of the amount of time your business requires up front, so the value of your time may have to be evaluated as you go. But you should have a clear idea on the costs, including any commissions taken by your upline, before you take the plunge.

Return Policy for Unsold Inventory

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Reputable direct sales companies will buy back 100 percent of unsold, marketable inventory within the first year of purchase at 90 percent of what you paid if you decide to leave the company. Read the fine print and be sure the company you are signing on with does this. Also, be sure your inventory remains marketable. If it is edible, be sure it has not expired. Safeguard inventory from damages; keep it away from children.

Companies may have different policies regarding returnability for different items. And companies may offer discounts on the nonreturnable items. Read all information carefully.

Sales vs. Recruitment

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Is most of the income from the direct sales company you are considering generated through sales of the product, rather than recruitment of other sales associates? This is key to finding a reputable direct sales company. Any company that focuses too much on recruitment could be a ​pyramid scam.​