The Drawbacks to Starting a Business with Direct Sales
written by: Lucinda Watrous•edited by: Jean Scheid•updated: 6/21/2010
When considering whether or not to start a home based business with direct sales, it is important to consider both the advantages and disadvantages of a direct sales home based business.
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If you've looked at our article on the Benefits and Effectiveness of a Direct Selling Business, you should also take time to consider the drawbacks so you'll know more about the advantages and disadvantages of a direct sales home based business before you make the initial investment to get started. Let's take a look at the drawbacks associated with direct selling businesses.
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Many direct sales companies have quotas you must meet in order to retain active status as a consultant for the company. These requirements will vary from company to company, and after so many months of inactivity, you may risk dissolving the consultant agreement. These quotas are not hard for most people to meet, but are a necessary evil to ensure you're staying involved in the success of your business.
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Independent Contractor Status
You're going to be responsible for your own taxes. This may or may not be an issue for some people. It is important to properly track income and business expenses to ensure your taxes are properly filed. Independent contractors who run their own businesses are responsible for paying estimated taxes each quarter. Avoiding taxes will put you at high risk for audit with the IRS.
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If you live in an area full of consultants for your particular company, you may have trouble finding people who are interested. Also, if there are too many people in your area involved in direct sales in general, people may be tired of being approached about so many different parties to host.
You'll also experience competition with in-store products with a lower price tag. This doesn't mean you shouldn't sell the products, it just means you'll have to work harder to find ways to convince people to buy them. For example, consider product warranties that may not be available with the in-store products to give yours the edge and remind people they get what they pay for.
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Marketing and managing the business and finding leads can be very time consuming. Some direct sales businesses do not allow consultants to link to their websites, because search engines would have a hard time ranking one consultant over the other and it generates an unfair advantage. Even though a website can be a very effective marketing tool, consultant websites can't usually be used to their full potential.
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Many consultants will run into more rejection than they will acceptance. It's important to be able to talk to many people, especially those outside of the circle of people you know. If you're not good at handling rejection, you may want to reconsider your involvement in a direct sales business. There are ways to learn how to deal with rejection and work around it. The training provided by the direct sales company will help with this.
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What it comes down to it, each person will have different thoughts and justifications about how to weigh the advantages and disadvantages of a direct sales home based business. The thing about the direct sales businesses is they all have different aspects to deter and appeal people to them, and where one company may be right for a person, another may not be.