Home based businesses seem to have become the new normal. A decrease in job security has made working for yourself seem like a good career move. At least that way you know your boss will never fire you. Families with children also save on childcare costs with a home based business. Many time the home based business leads that come your way will be direct selling opportunities. Regardless of your sales skills, you need to take a close look at any of these opportunities that comes your way to make sure that the company has a viable sales strategy.
Direct selling is the practice of selling products through in home presentations instead of selling in stores. Avon and Tupperware are some of the most famous, but now you could be invited to a sales party for just about anything. If you’ve been to one, you know that at the end they always present the opportunity to sign up to become an independent business person with the company. Most of these companies are set up as multilevel marketing (MLM) systems. The problem with these systems is a very unequal distribution of profits. It can be so extreme that the top person might make around $11,000 per month while the each person bottom level (which is half of the people involved) would make a whole $7 per month. I didn’t make those numbers up; they were calculated from the literature of a direct selling company.
How to Evaluate
The two major flaws with the MLM structure are that the commissions are distributed backwards (the people farthest from the sale make the most money) and there is no limit on the number of salespeople in any given area. Opportunities with the following characteristics will likely end up being work from home jobs that cost you money:
- More than 4 levels in a “pyramid”
- The person who makes the sale does not get the largest commission
- Expensive, overpriced products
- Income primarily based on recruitment not sales
- Unlimited recruiting is encouraged
- You are expected to make a sale based on relationship not the merits of the product
- You pay a large fee (and annual renewal fees) to purchase the right to sell the product
- You are being recruited by someone who just started selling in the past few months.
Take your time and evaluate every opportunity thoroughly. Ask to see the numbers they don’t want you to see like average income of participants, average amount people spend trying to make it work, and how many people drop out after paying the sign up fee. For more information on MLM’s and their inherent problems, visit www.mlm-thetruth.com.