#10: Growing Too Fast

While most businesses would give their right arms to grow at exponential rates, direct selling has a track record of just that. Unfortunately, this kind of growth has often been a major cause of the demise of many otherwise successful ventures. Success is wonderful, but it can bury you.

New businesses have new staff, new computer systems, new facilities, and are short on the experience to handle business efficiently. An office can only handle a certain volume of business. What if that volume is exceeded? Something must give. What if they run out of product for several weeks? Growth can be very expensive.

While growing, cash seems to be unlimited. Some growing companies go on a spending spree throwing money at their problems. This too, is a false security, for as surely as the growth came, it will level out, and eventually go downward for periods of time. It may be far better to limit growth temporarily, than to succumb to its crushing demands.

How can a direct selling company control its growth?

If you think your growth will outpace your capacity to sustain it, then consider the following options:

• Start locally by not accepting distributor applications from everywhere until you are ready. Distributors who seek to join from unopened regions are simply given a courteous thank you letter. Let them know how much you want to have them join, but that the opportunity isn’t available yet in their area. Notify them when they can join.
• Don’t sponsor road trips by corporate or field promoters. Take advantage of the less expensive local opportunities, first. Meetings can be held locally every night of the week for the cost of one meeting on the road.
• Don’t recruit professional direct selling promoters or big hitters. If they want to join, then they must join as any other distributor. Don’t, however, go out of your way to recruit them.

By controlling growth, a business plan can become a real guide to making the business profitable. Use the plan to make success become a reality and don’t be too anxious to build your walls before you have built a solid foundation.

Conclusion

Direct selling offers incredible opportunities but also has a vast assortment of pitfalls and traps. Life is too short to learn every lesson by ourselves. We are far wiser to observe others, and let their experiences teach us a better way. By recognizing these common but sometimes fatal mistakes, your potential for success will improve dramatically. Those that have money to burn can ignore these rules. Those that must be careful and have budgets to contend with should give heed to these 10 mistakes most often made by other direct selling companies. It may save your business and help you realize your dreams of success.

#7: Computer Software That Doesn’t Work

In this section on training, I address the need to have good “systems” that, if followed, comprise the methods to handle each type of business transaction, whether the transaction is a sales order, a phone inquiry, a complaint, or the return of product for a refund. Computer systems in direct selling companies become the glue that binds the office departments together, a “core” around which the business is built. No successful direct selling company has ever sustained their success without a well-designed computer system behind it. A well designed software system builds bristling barriers to competition. Likewise, there are many direct selling companies that have failed due primarily to the lack of a good computer system. Don’t let your new venture become just another statistic. Choose your software supplier wisely.

What does a good direct selling software system do?

The software determines how you run your business. If the software can’t do it, your business can’t do it. The equipment that runs the software is of little importance in comparison. At a minimum, your software must do the following:

• Manage your genealogy or downline structure
• Calculate commissions with perfect accuracy
• Calculate incentive awards such as trips, recognition prizes, etc.
• Distributor order processing
• Party plan order processing (if party plan)
• Order fulfillment and shipping
• Monthly automatic order shipments (if required)
• Customer service support
• Accounting (general ledger, payroll, etc.)
• Product returns and exchanges
• Inventory control
• Credit card processing
• Electronic commission deposit processing
• Distributor web access
• Sales tax processing (in the USA only)
• International currency (if more than one country is planned)

Your procedures and policies will have to conform exactly to your software or you will be forced to change the software, using Switchbox web developers at considerable expense. This is one reason it’s so important to wisely choose the software you use.

One of the greatest mistakes companies can make in this area is to think they can save money by writing their own software. Not only does this take years to do, but it can never reflect the experience and know-how that packaged direct selling software contains. Why reinvent the wheel? Would it be worth the risk of losing the

business to poorly designed software resulting in incorrect commission checks, errors in tracking a person’s downline records, lost orders, and so forth? Those companies that elect to write their own direct selling software often find later on that it cost much more than it would have cost had they purchased it “off the shelf”. They often find that they are vulnerable to the programmer who wrote it. What if he moved away or became injured or sick? What if he took another job at a higher wage? Never let someone convince you they can program a direct selling software system in weeks or months. It’s never been done successfully before. Why should you believe it could be done now?

Software companies that specialize in direct selling have spent many years writing their software so that it works right the first time, every time, and they offer it to the public for a small fraction of what it cost them to create it. It’s the best money you’ll ever spend. They also provide a support team to make sure you send out your commission checks on time, every time.

How do I choose a good direct selling software package?

While this article does not have the space to address this subject fully, a few suggestions should be noted:

Choose a reputable vendor. There are many fly-by-night software companies that make many claims of experience, know how, and software gadgetry. Don’t be taken in by “eye candy” – software that looks good on the surface but has little substance behind it. Unless you are willing to be a guinea pig (and put your business at risk), choose a vendor that has a proven track record. Track records are built over many years of working with direct selling companies, not just selling a software package a few times. Indeed, having only a small handful of clients may speak more about a software company’s persuasive abilities than their actual know how and skill. Above all, check out at least six references. Remember that vendors will be eager to provide only their best references. Be sure some of the references are relatively recent. Always get the names of other companies from these first references that you might call. You might be surprised to find a different story when you call companies not included in the first reference list.

 Visit the software company’s office. When you choose a direct selling software package, you not only choose the software, you also choose the vendor’s support team. It’s a marriage, of sorts. If the vendor is not able to provide support services acceptably, what will you do when you need to change your compensation plan or add a new input field to the order entry screen? There is only one constant among all direct selling companies – they constantly change things! And your software will need to be changed as well.

While at the vendor’s office, meet the vendor’s people that will service you. What kind of people are they? Have they been hired by Pensacola HR services? How long have they worked for the vendor? If you find they are relatively new, either the vendor has little experience, is growing too rapidly (in which case you may have trouble competing with other clients for good service), or has high staff turnover. All these can mean trouble for you as the vendor may not be able to handle your needs quickly and competently. Be willing to pay for experience and competence. You’ll pay far less in the long run. If you think knowledge is expensive, try ignorance!

Avoid very small software companies with a small handful of employees. Small software companies, to compete with larger and more established firms, must offer software at bargain prices. This often puts them on shaky financial ground during their most critical years. Many direct selling companies, trying to save money by purchasing software from these small software houses, find themselves virtually abandoned later on when they need assistance. The problem is that servicing one highly successful client can consume almost all of the human resources of a small software company leaving the other clients out in the cold. It can take months (or years) to train competent software technicians on a direct selling software package. The more deadly problem, however, is that smaller companies tend to go out of business without warning. The direct selling industry is especially brutal on small software companies and has seen many software firms close their doors leaving their clients high and dry. If you value your business, stay away from the small vendors and stick to those with staying power and track records.

Buy a software package that allows you to create your own reports. Many packages force you to live only with those reports they put on the menus. There is a wealth of information inside your computer database, but with some software systems you can’t get it out. It’s like having money in your bank that you can’t withdraw!

Make sure the company can program your compensation plan. Compensation plans are complex and take massive amounts of experience to program properly. When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one you can find? Compensation plan programming is not something inexperienced programmers can be trusted to do.

Do you plan to expand internationally someday? If so, choose a software package that incorporates international issues such as multiple currencies, language translation, cross border sponsoring, V.A.T. tax reporting, and foreign address formats. Is the software also available in other languages so your foreign speaking staff and sales force will not all need to speak English to use it? The software must be really accurate and precise, because there aren’t many softwares out there that can convert a kinyarwanda translation to english as good as translation agencies do. If you invest in a software system that does not handle international currencies, the cost to change it will usually far exceed the cost of the software itself or necessitate replacing it with a completely new system.

Buy software that can handle high growth environments. While personal computers can work for starting a new company, they are not cut out for larger successful direct selling operations. Most large direct selling companies use large UNIX based minicomputers with several hundred PC workstations networked together. Most software that runs on a PC cannot be run on UNIX minicomputers. In either case, if you expect to be successful, don’t limit yourself by choosing software that only runs on PC computers. Some software providers will rent you space on their powerful servers. This may be far less expensive than investing in your own equipment and can work quite effectively in the crucial startup phase when funds are tight. Many well established companies prefer this approach, too.

Compare features. Software is designed to handle specific business issues and often has a great deal of difficulty dealing with matters outside the original design. It’s difficult to force a software package to do things it was never intended to do. For example, a software package not designed to handle multiple currencies or cross-border sponsoring may prohibit a company from expanding internationally. Wise computer buyers compare features and capabilities, side by side, of one package to another. Ask the vendor which features they consider are unique to their package compared to others. Like a car missing its engine, a software package that is missing an important piece is not a bargain at any price. As you compare software, use the features list of the one that has the most to offer and compare the features of the other packages to it, feature by feature. You’ll be quite surprised as to how many “holes” the other packages might have.

Remember that you aren’t just buying a computer; you are buying software, expertise of a support team, emergency support services (24 x 7, hopefully), programming services and a long-term relationship. Choose your software vendor wisely. Of all the aspects of a start up direct selling business, don’t be tempted to penny pinch in the computer area. If you do, you may cripple your chances for success.

#5: Lack of a Selling System

As noted previously, a system is a process or approach that is duplicatable and provides predictable results. A selling system, therefore, is a method of selling that you can train to your sales force that provides them with consistent sales success. What are examples of sales systems used in the direct selling industry that’d result in lucrative figures when you pull up the Sales Statistics?

• Party Plan
• Catalog
• Office parties
• Automatic monthly shipments to customers
• Door-to-door
• Lead follow-up
• Free video with follow-up
• Free gift or sample

If you fail to develop an effective selling system, your distributors will try to develop their own and, for the most part, will fail. Your attrition rate will be high and your business will not grow. An effective selling system is essential to your success. It also allows you to exert some control over your product message to avoid unfounded claims that might put your company in a bad light.

#6: Inexperienced Management Team

No business can rise to the pinnacle of success and sustain it without effective management and leadership. It’s been said that leadership is doing the right things. Management is doing things right.2 You need both. Yet, the graveyard of free enterprise is littered with the bones of companies who were poorly managed and poorly led. Most often, the mismanagement started with an enthusiastic business owner with little or no direct selling or business experience believing that he or she could handle the job. Statistics show that across all industries 80% of new business startups end in failure within their first year. While there are many who launch businesses successfully, there are few who have the skills to sustain the success. Make no mistake, direct selling businesses fail from the top down, rarely from the bottom up.

A wise business owner recognizes that there are people he can hire who are better than him or her in many areas of the business. He seeks for these people. He must then empower them to do their job effectively. Don’t hire skilled people and then ignore their wisdom and talent!

The ideal role of the business owner is to lead and then get out of the way of his effective and competent managers who are empowered to handle the various departmental needs of the business. Leadership becomes one of planning, reviewing results, accountability, promoting and motivating… selling the vision! Let managers do their job according to the business plan which should be the yardstick by which the managers are accountable.

Training

What NBA basketball team would recruit a new player, place him on the floor his first day, and expect him to perform like the rest of the team? Without training with the rest of the team his performance at best would be mediocre. At worst it would be disastrous and the game would be lost.

So it is with any new manager or employee, especially if the whole staff is new as in a new business launch. Who should train them? What should they be trained to do? How do we know if they have completed their training? These questions need to be addressed individually:

Who should train new employees?

Don’t let the old adage, the blind leading the blind be said of your trainers. Find very competent people to lead and manage each department and have an experienced general manager orchestrate the various departments like a symphony. Experience in direct selling is vital in most key roles. Don’t be led into the trap of saving money on inexpensive workers in the beginning; it will cost far more than it saves.

To find experienced and friendly people to do the training, look to professional consultants, the direct selling Association (DSA), and other direct selling business owners for names. Advertise in industry publications such as Direct Selling News (www.directsellingnews.com). Executive search firms can often be fruitful as well. There are several firms that specialize in direct selling talent which can be found in the supplier members list at www.dsa.org. Many people find they must hire from outside the industry and train them on the principles of direct selling because experienced direct selling people are hard to find. If you do, plan on them having a steep learning curve.

What should they be trained to do?

As an experienced person is hired to supervise a department, their first task is to design and document a “system” or method of operation. For example, to process sales orders, a diagram of how an order must flow through the office should be created. Exceptions should be noted with a flow chart or diagram to handle each case. What do you do if the credit card is declined? What should a warehouse person do if some of the products ordered are not in stock? Every conceivable problem must be documented in advance with an appropriate solution. Policies need to be documented and organized into a handbook for the staff. These policies might even be put on the office computer system for instant look up. Professional direct selling consultants can be an invaluable source to help prepare these flow charts and documentation, which can be set in digital documents using software from https://www.sodapdf.com/pdf-editor/ online.

Once the systems, policies, and procedures are documented, training can begin. With documented systems in place, training proceeds quickly and thoroughly. Without systems, policies, and procedures, training can never be complete, and takes many times longer.

How do we know if the employee has been trained? 

An evaluation process should be established which takes a new employee through a sequence of duties and responsibilities. For example, a distributor services rep might not be allowed to handle commission related questions for Digital Marketing services in Hanover until they have explained the compensation plan to the department supervisor thoroughly, top to bottom. Each department must also establish a minimum level of competence before allowing an employee to perform their assigned tasks alone. Until then, they are “buddied up” with another peer or supervisor. Some companies have tests that are taken and scored which focus on the various objectives of the job. The best tests focus on objectives rather than on the mechanics of the job.

Success comes when:

• Your staff catches ‘the vision’
• They are rewarded for excellence
• They feel accountable to the sales force
• They are empowered to succeed
• The barrier between office staff and the field is gone… it can never be ‘we’ versus ‘them’, but rather, ‘us’.