#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.
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International Expansion Considerations
Expanding into international markets can be a lucrative opportunity for Direct Selling and Multi-Level Marketing (MLM) companies, but it can also be a drain on resources and funds. Here are some factors that should be taken into consideration when expanding into international markets:
Cultural differences
Be aware of cultural differences that may affect your products, messaging, and business practices. Understanding the customs, traditions, and values of the target market will help you identify if it is a good fit for your business and what strategies may need to be adjusted to align with local cultural norms.
Legal and regulatory compliance
Laws vary by country, so it is critical to consult legal experts in each market to understand the target market’s legal framework and regulatory environment. Some companies have been banned from operating in certain countries for noncompliance with local laws.
Logistics and supply chain
Consider the logistics of operating in a foreign market, such as shipping, warehousing, and distribution. Establish relationships with local suppliers, logistics providers, and distributors to ensure timely, cost-effective delivery of products to customers. You may find that, in some markets, logistical requirements or additional costs make operating there financially infeasible.
Payment and currency exchange
Explore your payment options and currency exchange strategies to determine the best approach for processing payments and paying commissions to the field. The volumes assigned to products are also impacted by how you handle currency exchange.
Language and communication
Language and communication barriers can be challenging when entering a foreign market. You will need resources for translating marketing materials, product information, and training materials into the local language. Your customer service team will need to support distributors and customers in the target market, which may require you to set up a regional office or hire multi-lingual employees for the various languages.
In closing, I’d like to share two pieces of advice. First, just because you can enter a market, does not mean you should. And second, don’t be in a hurry to expand. Be settled and operate well in your home market before expanding into others. It is easier to address challenges with one market than with many markets.
The 10 Most Common Mistakes in Direct Selling – Part 5
#8: Listening to the Wrong People
I am often amazed at how often my consulting clients have taken bad advice from people who know very little about direct selling. As a result, they often make foolish decisions along the way that cost them millions of dollars in lost opportunity.
The direct selling industry is a unique type of business. For the most part, things that do well in conventional business models do well also in direct selling. There are, however, many very unique aspects to direct selling where this is not the case. Here are some examples of what not to do and why:
- Retain a local attorney to deal with direct selling specific issues. This would be like hiring a foot doctor to do open heart surgery.
- Have a successful distributor from another company write your compensation plan. Distributors who have built successful businesses will know the compensation plan of that company. They will have very narrow experience with limited perspective and will, in most cases, design a plan that will not work well for your unique business. They don’t know what they don’t know and often have little or no corporate experience to balance their field perspective.
- Hire a computer consultant with little or no experience in direct selling to help you choose or design your software system. Direct selling has unique requirements and business practices that require specialized skill and experience. An inexperienced consultant will not know what questions to ask nor which issues are more important than others.
- Hire a VP of Sales with no previous experience in direct selling. Your VP of Sales will be the person responsible for working with your sales force. If he or she has no experience in direct selling, how will they teach the sales force how to build successful businesses?
In summary, find competent people who have experience in the type of direct selling business you have, remembering that there are many business models out there. These are the people you want to listen to. Remember also that what you do not know today will often be the cause of your grief tomorrow.
#9: Poor Customer Service
One of your most critical departments is the Distributor Services Department. Each person in this department will handle problems, complaints, inquiries, and a thousand other issues that arise from your sales force. Your sales force are all volunteers and will quickly fire you if they are not well taken care of. Your Distributor Services Department must consist of an elite “SWAT” team with an obsession for customer service excellence to your field distributors. They must be trained by those with a similar obsession for excellence. A few entrepreneurs try to rely solely on the Internet to handle questions and concerns by distributors. Don’t fall into this trap! direct selling is a relationship business. Yes, you should use the Internet to take care of some of the needs of your sales force, but you can never build relationships and loyalty through the Internet. That takes person-to-person contact – the lifeblood of this business. You will also find that some of your sales people are not comfortable using computers. Most importantly, do not outsource this function! Nobody will take better care of your precious sales force than you will.
Many companies enter the industry thinking they only sell a business opportunity and some great products. They soon learn that they sell something more, something of immense power: customer service. Distributors are fickle and seem to join the company that offers the most. They stick with the company that keeps them happy. Those who have shopped at Nordstrom’s soon learn the power of customer service excellence to build customer loyalty. Some direct selling companies find their average distributor stays active only a few months. Others find it is several years. What’s the difference between them? It’s not the compensation plan. It’s not the products they sell. Instead, it is how well the distributor is taken care of.
A Customer Service Excellence Plan
Excellent customer service does not come by accident. It is the result of well-thought-out plans and hard work. It starts by having a very committed Distributor Services Manager empowered to implement the necessary systems, policies, and procedures to achieve excellence. The Customer Excellence System (CES) must be comprised of at least four areas:
- Customer Information Data Base
- Follow Up Systems
- Satisfaction Measurement
- Work Load Monitoring
Let’s look more closely at each of these:
1. Customer Information Database
In today’s modern business, customers have very high expectations for service. When a distributor calls the home office to ask for information, they expect to receive their answer immediately, not an hour later. With a customer information data base, the service rep on the phone can instantly access information that would otherwise take minutes or hours to find. Their answers can be correct because they base their answer on the computer database of information. The goal of any customer information data base is to know everything possible about the distributor that might be the source of a question. From order status to commission problems, the customer service software must provide instant answers to distributors as they call the office.
2. Follow Up Systems
If 1,000 distributors were recruited this month, and 10,000 distributors had already joined, how many phone calls would they place with the home office? Most likely, well over 1,000 phone calls would need to be answered by professional, courteous, and competent office staff during the month. Of the 1,000 calls, how many would require a “call back”? It depends entirely on the quality of the customer information data base. The better the online information, the fewer call backs necessary. The goal of a good customer service system should be to have less than 5% of the calls requiring a call back. If 30% of the calls required call backs, there would be at least 300 opportunities for not following up and finishing the call. That’s 300 opportunities to lose a distributor per month.
Any customer service system that strives for excellence has a means of tracking each phone call or ‘service request’ to completion. Open calls can be tracked and aged with priority given to the oldest calls, or to the most important distributors. Such a system, often called an Event Management System, becomes the core of any professional customer service system. In essence, it keeps track of each inbound phone call or email from the field and makes sure that every call is answered in a timely fashion. It provides the department manager with the reports needed to avoid having a distributor’s call fall through the cracks in the floor.
3. Satisfaction Measurement
If you don’t know how well your customer service people are doing, then you don’t know how your future will be. If they are doing poorly, the company is doomed to failure. If the distributors rave about the excellent service they receive, you can be assured of future success because they will trust you. If they trust that their new recruits will be well taken care of, they’ll recruit. If they have doubts that a new recruit they bring in would be happy, they’ll hold back. A customer service system must include the ability to track satisfaction levels. How is this done?
When a distributor phone call is logged and closed, a follow-up call is placed, an email sent, or a survey letter mailed to the distributor asking:
- Was your call answered in a timely manner?
- Was the customer service representative courteous and professional?
- Was your question answered to your satisfaction?
Questions such as these, when answered by field distributors, become invaluable to reaching the goal of customer service excellence. The best software packages today incorporate Customer Service Excellence systems to make your obsession for excellence become a reality. Some companies provide bonuses to those reps who are consistently scored well by the distributors they serve.
4. Work Load Measurement
No customer service department can survive increasing workloads for long without burnout. If the number of calls received each day is tracked, with the length of time it takes to handle the average call, expansion plans can be put in motion before workloads become critical. Distributors cannot be serviced with excellence if there are too few people to do the work. Once again, the task of measuring workload will require an excellent direct selling software system.
In summary, let customer service be your secret weapon to success. It takes planning, commitment, and hard work to achieve the excellence a successful direct selling company needs.
The 10 Most Common Mistakes in Direct Selling – Part 4
#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.
