Yes, direct sales has some pretty amazing earning potential, which is why so many people have decided to invest so much time, energy, and yes, MONEY, into these thriving (and sometimes not-so-thriving) businesses. But the ugly truth- and we know how much I love to talk about the ugly truth of things- is that there are also a lot of ways one can lose time, energy, and money in these businesses. My goal with this post is to share what I've learned from experience and help others avoid these pitfalls. So, let's get started!
First, I will attempt to lighten the mood with a cute piggy in boots picture, sure to make you swoon before I hit you with some of these ugly truths. Annnnd you're welcome.
::SWOON::
Okay, cute piggy (the irony of piggy banks is not lost on me here)... Now let's get down to business! 5 easy ways to lose money in direct sales:
Incentives
We all start out with the best of intentions when it comes to incentives, and you've heard my thoughts on this in previous posts, but this can really be draining, if not done carefully. I went from small purchases, to large purchases, to even signing up with a whole other business for the sole purpose of getting a discount on items I intended to use for incentives.
From buying things, to making things, to product-swapping with friends, we try our best to come up with new ways to incentivize our teams, when really, our time, dedication, and often simple acknowledgement, go a long way in making people feel valued and appreciated.
The bottom line with incentives is, if someone wants to put in the work, and if their time and energy is a sacrifice they are willing to make, they will do it no matter what the incentives are. Yes, trips, rewards, and big things like that from corporate always help, but I am talking about YOU and your wallet here. Like I have said before, find out what motivates your team and go with that. Take polls, or reach out to your people individually, especially when they first sign up, and find out what motivates and inspires them. It is your job to find these things out. The best way you can fail your team as a leader is to spend all your money "motivating" them, only to end up with less motivated people and no business at all.
Givaways
Similar concept as with incentives, you do not want to be constantly giving products, services, and TIME away. All of these things are VALUABLE. You must be responsible with these things.
If you are in the business of selling products where samples are key, be sure NOT to end up in the business of giving away samples. There must be a balance here. The same goes for your time and services. If you are constantly meeting up for lunches, coffee dates and dinners, with the same people over and over, trying to get your products out there, trying to grow your team, etc., you will reach a point where you need to re-evaluate and decide if this is a good use of your time and money. Maybe find another way to connect with these people if after your first try, there doesn't seem to be much interest.
The more desperate you come across, the less desperate someone is to do what you do.
"Spotting" your friends and customers
This is a real weak spot for me. I am constantly giving stuff away (oh, did I forget to mention that in the previous paragraph)? And yes, I am constantly "spotting" people. Usually, I get paid back, but sometimes I don't, and that stuff can add up. I won't get long-winded here, just DON'T do it. You don't go to the grocery store and tell the cashier you will "owe" them for the gallon of ice cream you bought because you are broke from giving away products in your direct sales business, do you? No. Don't do it.
Moving on...
Taxes
In the beginning, I was so totes in love with my shiny new direct sales business, that was until Uncle Sam came 'round with the bill! "40%.... 40%???? Almost HALF of my earnings???" This will obviously be different from household to household, but it's harsh, man, HARSH.
Yes, you can write a lot of things off, which is great, but it sure can be a massive wake-up call if you are not business-minded and you are not a great money manager. Just be prepared. Save money aside, save all your receipts, save everything! Most importantly, get with a professional tax adviser, a business mentor, or leader in your company, who can guide you and give you advice on what to save and how to manage this.
For great advice on where to start, take a look at my friend Christine Baldwin's video on the subject: Christine Baldwin
Stock
Last but not least on the list is carrying too much stock, or sometimes, carrying stock at all. One of the best things my very first leader told me in this business- and I'm talking about a makeup business where stock would seem like a no-brainier- is NOT to load up on products and keep a bunch of stock. Best advice I NEVER followed!
It is so easy to think you need to always have everything on hand. Like, your customers will DIE if you don't have a tube of mascara ready and waiting at all times. Listen to me, it is OKAY to not have everything available all the time. People can wait. You will not lose customers if what they are getting from you is what they want and no other brand will do. The trick is, helping them REALIZE that no other brand will do, not making yourself a constant "beck and call girl" to insure you never lose a sale. Am I right, my Pretty Woman peeps?
To wrap up, watch out for these common money-pit... falls (oh, where are my Tom Hanks fans out there?) and take some time to evaluate how you are spending your time, energy, and money. You may be surprised at how easily you've fallen into some, if not all of these traps, but it's not too late to dig yourself out!
My challenge is this: Find yourself new and exciting ways around these common traps!
1. How can you motivate and inspire your team without always "incentivizing" them?
2. How can you give of your time and money more responsibly?
3. How can you help a friend without being taken advantage of?
4. How can you maximize and organize your income throughout the year to avoid going broke during tax season?
5. How can you create a demand for your product so high, your customers are willing to wait?
AWESOME BLOG! xoxo
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