Chances are, the concept of direct selling (or, as it's also called, network marketing, multilevel marketing, party plan marketing, and one-to-one marketing) rings a bell. You may be familiar with it from the likes of a local Avon lady or Mary Kay specialist who may have once rung your doorbell, or from a neighborhood Tupperware party you attended a few years ago. Perhaps you've purchased something from a friend who at some point went into direct selling as a side career.
It's also possible that at some point this kind of business turned you off. If you're like me, maybe someone you know--probably a relative, friend, or coworker--once came up to you and asked, "Can you do me a favor and come to this meeting with me? I'm looking at a new business opportunity, and I want to share it with you and see what you think."
Because you're a good guy or gal, you said okay--only to find that your friend had suckered you into an "opportunity meeting" for a new multi-level marketing business.
Does This Sound Familiar?
After being harangued for an hour or so about how you can make a fortune--with overly enthusiastic people delivering emotional testimonials about how much money they were supposedly making and a bunch of group cheers where everyone had to get up and yell, "Whoopee!"--the meeting broke up into smaller groups, where your friends and a bunch of other people tried to sign you up.
Maybe you did sign--and, as a result, ended up with $4,000 worth of water filters sitting in your garage. Or several hundred boxes of some superdeluxe nutritional products that supposedly allow you to eat cheeseburgers and watch TV and still lose weight. Or a special water ball that goes in your washing machine and does your laundry for a hundred years. Or amazing knives that cut through telephone books.
It's not surprising that your memories of the experience aren't fond ones.
This practice of pressuring people into buying a "distributorship" and, along with it, a ton of stuff they don't need and will never be able to sell is known as "front-loading"--and it's illegal, as is most of what the authorities call "pyramid schemes." The good news is that pyramid schemes are NOT what this lens is about. So please keep reading.
It's also possible that at some point this kind of business turned you off. If you're like me, maybe someone you know--probably a relative, friend, or coworker--once came up to you and asked, "Can you do me a favor and come to this meeting with me? I'm looking at a new business opportunity, and I want to share it with you and see what you think."
Because you're a good guy or gal, you said okay--only to find that your friend had suckered you into an "opportunity meeting" for a new multi-level marketing business.
Does This Sound Familiar?
After being harangued for an hour or so about how you can make a fortune--with overly enthusiastic people delivering emotional testimonials about how much money they were supposedly making and a bunch of group cheers where everyone had to get up and yell, "Whoopee!"--the meeting broke up into smaller groups, where your friends and a bunch of other people tried to sign you up.
Maybe you did sign--and, as a result, ended up with $4,000 worth of water filters sitting in your garage. Or several hundred boxes of some superdeluxe nutritional products that supposedly allow you to eat cheeseburgers and watch TV and still lose weight. Or a special water ball that goes in your washing machine and does your laundry for a hundred years. Or amazing knives that cut through telephone books.
It's not surprising that your memories of the experience aren't fond ones.
This practice of pressuring people into buying a "distributorship" and, along with it, a ton of stuff they don't need and will never be able to sell is known as "front-loading"--and it's illegal, as is most of what the authorities call "pyramid schemes." The good news is that pyramid schemes are NOT what this lens is about. So please keep reading.
Start Late, Finish Rich
A No-Fail Plan for Achieving Financial Freedom at Any Age
Most of the information in this lens comes straight from the book Start Late, Finish Rich by David Bach. An important strategy in improving your personal financial situation is to find a way to increase your income. The author devotes an entire chapter in this book to Direct Selling, explaining the good, the bad, and the ugly of this method of earning more money. I highly recommend this book, along with another book by the same author called The Automatic Millionaire
Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age (Finish Rich Book Series)
Amazon Price: $10.17 (as of 01/06/2010)
List Price: $14.95
The Direct-Selling Industry--An Objective Look
More from "Start Late, Finish Rich" by David Bach
I've started this section (of the book) talking about the negative side of direct selling because if you've been exposed to it before (as I've been), then like me you may think this entire industry is a sham. Truth be told, I felt this way for nearly two decades (ever since the first bad meeting I was roped into attending). Whenever someone would try to talk to me about the industry, I would turn and head the other way.All the same, I don't think you (or I) should dismiss direct selling out of hand. The fact is, the industry has changed enough in recent years to be worth a second look. What used to be a fly-by-night business of scammers now boasts a fair share of publicly traded multinational giants and well-established privately held companies with revenues in the billions. As a result, I've come to believe that direct selling now deserves serious consideration as a possible way to create a second, home-based income stream for yourself.
When Warren Buffett Takes Notice, It's Noticeable
To be honest, what got me to reconsider my negative attitude about direct selling was Warren Buffett. When I read in Fortune magazine that Warren Buffett, the billionaire investor and one of the world's richest men, was investing in a direct-selling company, I decided maybe I was missing something.For those of you who are not familiar with Warren Buffett, he's a widely admired, Nebraska-based financial guru (known popularly as "The Oracle of Omaha") who's built a fortune estimated at more than $40 billion. He's done this mainly by making long-term investments in boring, cash-cow industries like insurance and consumer products and soft drinks. So for him to invest in a direct-selling company meant something in that industry must have changed.
Direct Selling--Over $80 Billion a Year and Still Growing
What may have attracted Mr. Buffett's attention to direct selling is the fact that the industry is really booming. According to the Direct Selling Association (DSA), more than 13.6 million Americans were involved in direct selling in 2004, generating total revenues of just under $30 billion. Worldwide, some 47 million participants racked up sales of $88 billion.
Even more impressive (or surprising), studies show that mroe than one in two American adults have purchased goods or services from a direct-selling representative.
Even more impressive (or surprising), studies show that mroe than one in two American adults have purchased goods or services from a direct-selling representative.
What Exactly is Direct Selling?
Direct selling, network marketing, multilevel marketing, party-plan marketing, and one-to-one marketing are all variations on the same theme. As the DSA defines it, "Direct selling is the sale of a consumer product or service, person to person, away from a fixed retail location." Generally speaking, the person doing the selling is an independent contractor--usually called a distributor or a consultant--who basically contracts with the manufacturer to sell products ranging from nutritional supplements to makeup to rubber stamps. The sales typically take place through in-home product demonstrations, parties (think Tupperware), meetings, or one-on-one interactions ("Avon calling!").In addition to selling your product, you also recruit others to sell products for you. These so-called "downstream" distributors pay you a percentage of their sales--just as you pay a percentage of your sales "upstream" to the person who recruited you. The idea is to recruit so many people that an increasing amount of your income comes from their efforts, not your own. Indeed, in network and multilevel marketing, recruiting others is often a primary point of the business.
The reason you recruit others is so you can earn passive income from their sales and obtain new customers for your products or services. In truth, the best passive income in direct selling or network marketing comes from satisfied customers reordering products or services you previously sold to them. If the entire business is focused on the recruitment of more sales representatives--and not on the selling or consumption of services or products--something is amiss.
What Direct Selling is Not!
It's not about getting you to buy a ton of products up front--which, as I noted above, is considered pyramiding and is illegal.
It's not a get-rich-quick business. Any company that presents it as such should be avoided.
It's not expensive to get into. In most cases, you can get started with an investment of less than $300, and often under $100--but you may need to invest a few thousand to really get it off the ground.
It's not for the lazy. This business will not make you money while you're sleeping or sitting on the sofa watching TV.
It's not necessarily about roping in your family and friends. If your supplier seems to focus more on getting you to recruit buddies and relatives rather than on selling an introducing the quality products or services it is providing, you're with the wrong company.
It's not a get-rich-quick business. Any company that presents it as such should be avoided.
It's not expensive to get into. In most cases, you can get started with an investment of less than $300, and often under $100--but you may need to invest a few thousand to really get it off the ground.
It's not for the lazy. This business will not make you money while you're sleeping or sitting on the sofa watching TV.
It's not necessarily about roping in your family and friends. If your supplier seems to focus more on getting you to recruit buddies and relatives rather than on selling an introducing the quality products or services it is providing, you're with the wrong company.
Why Consider Direct Selling as a Home-Based Business Opportunity?
I know I'm going out on a limb here by recommending direct selling as a business to consider. I'm doing this because it really can be an excellent source of additional income. To me, what many people see as a downside to direct selling is actually an upside. The fact that most people don't get rich in this industry, but instead "only" make an extra $500 to $1,000 a month, is exactly what excites me.
As I noted earlier, the average wage earner in America makes around $37,000 a year. If you're in that range, earning an extra $500 to $1,000 a month amounts to an increase in your income of anywhere from 16% to 33%! Saving just a quarter of that could represent the difference between being able to retire and having to work until you drop. And if you're lucky enough to be earning more than the average, the extra income could be what winds up buying you your financial freedom.
As I noted earlier, the average wage earner in America makes around $37,000 a year. If you're in that range, earning an extra $500 to $1,000 a month amounts to an increase in your income of anywhere from 16% to 33%! Saving just a quarter of that could represent the difference between being able to retire and having to work until you drop. And if you're lucky enough to be earning more than the average, the extra income could be what winds up buying you your financial freedom.
The Direct Selling Association...a Great Source of Information
First, let me make it clear that not every Direct Selling company has chosen to become a member of the Direct Selling Association (DSA). Some folks think that all legitimate Direct Selling companies are members of the DSA, while those that aren't members are all scams and pyramid schemes. Nothing could be further from the truth.Watkins and Tupperware are two giants in the Direct Selling industry who have chosen not to renew their membership in the DSA. It seems that they, along with a number of other Direct Selling companies, feel that the DSA now grants membership privileges to any company (even those of questionable integrity) who is willing to pay the thousands of dollars each year it costs to be a member. They feel that the rigorous application process is no longer used when deciding who can and who can't join the DSA. For this reason, some Direct Selling companies feel that it's not worth the huge yearly fees to be a member alongside questionable companies.
That being said, the DSA website remains a great place to find all sorts of information on Direct Selling and on Direct Selling Companies.
Here are some recommended links from the DSA website:
What is Direct Selling?
The History of Direct Selling
The Benefits of Direct Selling
How to tell the difference between a legitimate direct selling business and a pyramid scheme
Is Direct Selling the same thing as Network Marketing or Multilevel Marketing?
Direct Selling refers to a distribution method (a way to sell products or services).
Multilevel Marketing (also known as Network Marketing) refers more specifically to a type of compensation plan found in direct sales. A direct selling company that offers a multilevel compensation plan pays its representatives/distributors based not only on one's own product sales, but on the product sales of one's "downline" (the people a representative/distributor has brought into the business, and, in turn, the people they have brought into the business).
Multilevel Marketing (also known as Network Marketing) refers more specifically to a type of compensation plan found in direct sales. A direct selling company that offers a multilevel compensation plan pays its representatives/distributors based not only on one's own product sales, but on the product sales of one's "downline" (the people a representative/distributor has brought into the business, and, in turn, the people they have brought into the business).
I'm definitely interested in earning an extra income with Direct Selling. How do I learn more?
The best way to learn more about direct selling is to read. Read everything about Direct Selling that you can get your hands on. Scroll down this page, and you will see that I've listed several of the most popular books on the subject. I highly recommend that you purchase these books, or check them out at your local library.If someone was kind enough to refer you to this website, then by all means, contact them and ask them to tell you about the Direct Selling company they are associated with. Their company may be a perfect fit for you.
The Member Directory at the Direct Selling Association's website contains links to the websites of over 200 Direct Selling companies. Take some time to check out the ones that interest you. (Remember: The member directory of the Direct Selling Association does not include every reputable company. Just like every legitimate business does not choose to pay for membership in the Better Business Bureau, every legitimate Direct Selling Company does not choose to pay the thousands of dollars each year that it costs to be a member of the DSA.)
The company that I am personally affiliated with, and that I can highly recommend, is Watkins. They are a fantastic company to work with, but they are certainly not the only good company out there. The main thing to look for is a company who has products that you would buy anyway, even if there were no income opportunity attached to them.
Since many Direct Selling companies have a Multi-Level compensation plan, I recommend that you check out this website to learn more about Network Marketing.
Finally, check out the comments section at the bottom of this page. I encourage folks who are already involved in Direct Selling to place a link to their website in their comments. You may just find the right company for you by visiting these websites.
Books about Direct Selling / Network Marketing
Making Millions in Direct Sales: The 8 Essential Activities Direct Sales Managers Must Do Every Day to Build a Successful Team and Earn More Money
Amazon Price: $13.57 (as of 01/06/2010)
Be a Network Marketing Superstar: The One Book You Need to Make More Money Than You Ever Thought Possible
Amazon Price: $10.20 (as of 01/06/2010)
Direct Sales: Be Better Than Good--Be Great!
Amazon Price: $22.50 (as of 01/06/2010)
Complete Idiot's Guide to Direct Marketing
Amazon Price: (as of 01/06/2010)
Direct Selling 101: Achieve Financial Success through Network Marketing (Your Coach in a Box)
Amazon Price: $22.78 (as of 01/06/2010)
I appreciate your comments!
If you are currently affiliated with a Direct Selling / Network Marketing company, feel free to include a link to your website in your comment.
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- CarolSue CarolSue Sep 14, 2008 @ 7:17 pm
- Very informative site on direct selling and multi-level marketing. I am also involved in multi-level marketing with Shaklee, a manufacturer for over 50 years of green products. Hope you can visit my MLM lens at http://www.squidoo.com/mlm-resources
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- skilkenny skilkenny Aug 28, 2008 @ 8:30 pm
- Check this out - www.givemechocolatenow.com
Sandy K
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