Entrepreneurs planning to launch a direct selling business might have various ideas and approaches. Among these, there are some that do not yield positive results. If the negative impacts of these choices are not immediately apparent, they will inevitably affect the company in the long term.
Below, you will find a list of common mistakes along with my thoughts on each:
“We will copy that company’s compensation plan and duplicate their success.”
The compensation plan is an integral part of a company’s whole strategy. Depending on the choices made when designing it, it favors certain type of direct sellers over others, rewards some behaviors at the cost of others and at the end, constitutes a strategic direction. While a plan designed for one company might perfectly suit its needs, it might very well end up with very unfavorable results at another one.
“Compensation plan is the driving force in this industry. Therefore, the only way to succeed is to have the compensation plan with the highest pay out.”
A compensation plan that pays the highest commissions does not necessarily mean it is the best plan for your business. It may give a competitive edge, but at the same time, it will be the most expensive for you. Prioritizing high payouts in designing a compensation plan could be financially unsustainable.
“The easiest way to build a network of independent consultants is to bring in good direct sellers from other companies.”
This might really seem to be an easy solution. Yet no one can guarantee that those leaders will duplicate their success at your company. Worse is, no one can guarantee they will not leave you the same way before you get any returns from your investments you made on these leaders.
“Initial momentum is very important. During our first few months, we will recruit as many direct sellers as possible.”
Initial momentum is important in our industry, so is long-term success. If those new recruits are not well-trained and motivated, which is quite possible when there is mass recruiting in a short period of time, one can forget about that long-term success.
“This is a people business. No need to invest in those new digital tools.”
Direct selling is people business, for sure. But those tools like social media, video conferences or livestream shopping are there only to facilitate people’s businesses. If you don’t make use of them, you will watch your competition doing so. Embracing technology enhances efficiency and competitiveness.
“We met a fantastic leader on the field. We plan to delegate opening the market to that person.”
Allowing field leaders to open a market is a tricky move. If not well-monitored, the whole launch project and the weeks of hard work can easily turn into a disaster. Alongside all the business risks involved, the company may easily find itself in troubles due to various compliance issues.
“We have been repeatedly recommended to closely follow the competition, but we don’t see any benefits in this.”
A direct sales company faces competition from other businesses using this channel, as well as companies from both e-commerce and brick-and-mortar industries that sell similar products. Good luck if you are not following your competitors!
“Forcing the field to comply with regulations hinders growth. So, we will not be tough. We plan to look the other way when something happens.”
I can only say how dangerous this approach is. Direct selling industry history is full of examples of companies that did not have policies in place and/or ignored enforcing their policies. Neglecting regulations and enforcement leads only to legal and reputational risks.
“We know how to run this company. It’s a waste of time to meet with the field leaders and listen to their endless complaints.”
To me, a demanding sales organization has always been a gift. Imagine for a second, if you hear nothing from your consultants. This should ring the alarm bells at the company! Secondly, you might have been successful so far, but there is always room for improvement. And the idea that will take you there might very well be initiated by your consultants.
“We will disrupt direct sales industry.”
I left this approach to the end as it is my favorite of all. Ironically, this bold statement is made by those entrepreneurs who either have very little or no knowledge about the industry. We have seen disruptive innovations across many industries. This, above all, takes an in-depth understanding of that industry. Entrepreneurs should avoid the notion of disrupting the direct sales industry without a deep understanding of its dynamics and complexities.
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Hakki Ozmorali is the Founder of WDS Consultancy, a management consulting and online publishing firm in Canada, specialized in providing services to direct selling firms. WDS Consultancy is the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki Ozmorali is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.
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