Start Late, Finish Rich, page 21
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 multilevel 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 friend 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 section is about. So please keep reading.
THE DIRECT-SELLING INDUSTRY—
AN OBJECTIVE LOOK
I’ve started this section 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 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 13.3 million Americans were involved in direct selling in 2003, 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 more 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 and 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 a $1,000 a month, is exactly what excites me.
As I noted earlier, the average wage earner in America makes around $36,000 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.
13 REASONS TO CONSIDER DIRECT SELLING
REASON NO. 1
THE MOMENT YOU JOIN A DIRECT-SELLING COMPANY,
YOU ARE IN BUSINESS
Generally, when you start a new business, the first weeks and months (sometimes years) are spent developing relationships, finding reliable suppliers, testing marketing plans, and the like. Not so in direct selling. Once you find a company that’s right for you, it’s all there, ready to go—suppliers, marketing plans, training, you name it. You can start going after customers from day one.
REASON NO. 2
YOU DON’T HAVE TO REINVENT THE WHEEL
The hardest part of becoming your own boss is figuring out what business you’re in. What are you selling? Who are your customers? What’s the best sales approach? Will it even be profitable? A direct-selling company that’s been in business for a while and has a proven track record (which is the only kind to join) has long since figured all this out.
REASON NO. 3
YOU DON’T HAVE TO DO IT ALL YOURSELF
Trust me, as an entrepreneur who’s created a business from scratch and is now creating a new industry (financial lifestyle education that works)—it’s hard! I spend tons of time and lots of money going to coaching programs, attending entrepreneur clinics, and taking marketing courses. I’ve had to go out and find all of this support on my own. When you join a top-notch direct-selling company, they provide you with an entire training system that usually includes “learning in a box” (e.g., at-home study courses as well as extensive audio, video, and book resources) along with regular training and motivational seminars.
My only warning about this aspect of direct selling is to be careful that you don’t become a professional “training junkie.” Unfortunately, some people get so hooked on the courses and the workshops that they forget why they signed up in the first place. All the training and motivation in the world is useless if you don’t actually go out and sell some product.
REASON NO. 4
YOU WILL BE FORCED TO STRETCH YOURSELF
Let’s be totally honest here—you’re not going to start a business (any business) at home in your extra hours without massive effort. And you’re not going to succeed at direct selling without really working hard.
There are occasionally a few exceptions—and, believe me, if you join this industry, you will hear about people who supposedly made tons of money without lifting a finger. But they are the exceptions! Anyone who gets involved in direct selling is going to have some really bad days. Remember, you are going to be presenting a product or service to people, and some of them (maybe a lot of them) are going to REJECT YOU! At that point, you will either quit or stretch yourself. All personal growth—and, along with it, income growth—comes after that stretch, not before.
REASON NO. 5
YOU WILL FIND MENTORS AND EXPERTS
While groups like SCORE can help, the fact is that when you start a business, it’s often hard to find experienced mentors with the time and inclination to help guide you to success. This problem does not exist in direct selling. Since the person who introduces you to the business gets paid only if you succeed, he or she has a vested interest in seeing that you succeed. This means you should be very careful about the person you allow to sign you up, since he or she will become your mentor.
REASON NO. 6
YOU CAN CREATE PASSIVE INCOME
The hardest dollar you will ever earn is the one you are paid in exchange for your time. Whether you earn $5.15 an hour minimum wage or $500 an hour like my trademark attorney, people who get paid by the hour are trading time for money—and there are only so many hours in a day. The key to being rich, therefore, is getting money to come to you 24 hours a day without your having to be working all the time. In direct selling, as you build a customer base, you not only earn money from your own efforts but, as you get other people to start their own businesses, you begin earning money from their efforts as well. This idea of earning money from others people’s efforts—or what is known as passive income—is not unethical, by the way. It’s called being a “business owner.”
REASON NO. 7
YOU MAY MAKE A NEW CIRCLE OF FRIENDS
Here’s something you may not realize: A lot of the people you hang out with today are really about your past. You may have a ton of friends you made 5, 10, maybe 20 years ago who have no desire to do or be more than they are right now. And the moment you tell them what you are doing, whether it’s going into direct selling, buying a house, paying yourself first, or simply learning about all of this, they are going to put you down and tell you you’re being stupid.
This will hurt and upset you, and you will find yourself tempted to “throw in the towel” in an effort not to alienate your old friends. After all, the only alternative is to make new friends. And when you are older, making new friends is not easy.
The beauty of direct selling is that you join a team of people who have similar interests and dreams to do and be more. As a result, you may find yourself building a whole new world of new friends.
REASON NO. 8
YOU DON’T HAVE TO RETIRE
In Chapter Twenty-two, you’ll learn why I think retirement is a myth. The beauty of a direct-selling business is that if you are successful and enjoy it, no one can force you to retire from it. You won’t get downsized or outsourced into retirement. Many retirees find that direct selling is a nice way to supplement their Social Security checks or fixed income while staying active and socially involved.
REASON NO. 9
YOU GET TO HELP OTHER PEOPLE
Direct selling may be the ultimate “people” business. It’s all about helping and being helped by the people you work with—not only your customers but your colleagues, whom you mentor and who mentor you. Not every line of work gives you the opportunity to do this and to make a good living at the same time.
This aspect of direct selling is one of its great strengths. Whether you get involved in direct selling or some other business, what will make you successful is your desire to help other people. If you work from that place with integrity and honest intentions, you will lead a life of significance—and you will be a better person at the end of the day. You will also earn more money.
REASON NO. 10
YOU MAKE YOUR OWN HOURS
Direct selling tends to attract women, couples, and families looking for a way to balance their lives with their need for additional income. Because you decide how hard you want to work and how much you want to earn, you can create the life you desire in this business. No one is out there insisting, “You have to do this full-time!” While some direct-selling people do work 60 or more hours a week, the choice is theirs—and yours. (Indeed, according to the DSA, more than 85% of direct salespeople work fewer than 30 hours a week.)
The best advice I can give you along these lines is “don’t quit your day job”—or even think about it—until your direct-selling income outstrips your regular income. (This applies to any new business you may start.)
REASON NO. 11
TAX INCENTIVES!
As I noted earlier, the tax advantages to owning your own business are huge. It’s not just the great retirement accounts business owners qualify for. There’s also the fact that many daily activities—such as travel, telephone conversations, entertainment, and the like—can turn out to be legitimate business expenses that are at least partly tax-deductible. One of the great things about direct selling is that the business is so intertwined in your life that many normal activities become business-related—and, hence, deductible. (For details on what constitutes a legal tax write-off, consult your tax advisor or visit www.irs.gov and request Publication #535, “Deducting Business Expenses.”)
REASON NO. 12
DIRECT SELLING IS LESS EXPENSIVE TO GET INTO
THAN MANY OTHER BUSINESSES
As I noted earlier, some direct-selling companies sell start-up kits for as low as $200; some are even $10—or free! There are not many other businesses where you can get started on such a small initial investment—especially when you consider that you’ll be associating yourself with an established company that will more than likely provide you with a completely automated accounting and billing system, as well as introductory training, access to professional marketing materials, and business and personal development resources.
REASON NO. 13
IT’S A FAMILY BUSINESS
While working with your spouse and children might not be tops on your list, a direct-selling business is an excellent way for you and your family to spend time together. Meeting new friends together, sharing products you love with others, and taking the incentive trips many companies reward distributors are just some of the opportunities. And that doesn’t include the extra time you can spend with your family once your business has been established. There is no boss to tell you when you have to work.
Often, children can help you in certain aspects of your business, giving you an excellent environment to teach them self-reliance and responsibility. Lastly, many direct-selling companies allow children to either inherit the business you have built or start a business under you, giving them multiple options as they plan their own lives and careers.
FIVE MAJOR DOWNSIDES OF DIRECT SELLING
Okay, we’ve looked at the major reasons why you should consider direct selling as a possible home-based business you could run. But that doesn’t mean you should run blindly to the first direct-selling company you can find and sign up. There are some risks involved in this industry, and it’s important that you weigh them before you make any commitments.
First, despite the presence of a growing number of respectable players and various federal and state laws designed to protect home-based business owners, the nature of direct selling creates a fertile environment for con artists—and many direct-selling companies that appear legitimate or seem to be growing fast are really making only their owners rich. In my view, the single biggest problem in the industry is the high percentage of businesses that pop up and then disappear in just a year or two.
The “business explosion” rate in this industry is shocking. One minute a company is bragging about doing $30 million in its second year (you’re reasonably impressed). Then, six months later, it’s out of business (and you’ve wasted six months—not to mention all the money you put into it). This happens a lot. I’ve seen hardworking people spend a decade in this industry going from one company to the next because of this “explosion rate,” all the while getting nowhere fast.
Second, the business is overly prone to what I call the “old razzle-dazzle.” It’s easy for unsavory operators to prey on people’s desire to get rich quick. They show off their cars and jewelry and brag about their vacations. They tease you with images of the “good life”—and tell you that you can have it, too!
