Direct Sales: How and Why It Could Be Your Best Money Maker

Money MakerI Believe In Opportunity 

Recently, I have witnessed a lot of distrust and dislike for certain side hustles or side gigs, namely with respect to direct sales and MLM companies. I share a different perspective, and I am going to tell you why. I believe direct sales and MLM companies can present one of the best side hustle or side gig for anyone who is interested in building their own business. But, before I do, I want to share a few things that you need to know. 

Background Info You May Not Know

MLM stands for Multi-Level Marketing. Direct Sales and MLM companies have been around for over a hundred years, and started with door to door sales of knives, encyclopedias, and perfumes. This is how Avon started. It was a sales person who performed poorly at selling books, but every house he went to, he received praise for his fragrances and cosmetics that he made at home as a hobby. One of the original side gigs, if you will. He expanded on this side gig as he saw more promise in selling women’s products than the books that he peddled. Today, that company is still in existence, and is still a profitable way to earn money.  

Tupperware, Amway, Thirty-One Gifts, Scentsy, Norwex – these are just a few of the opportunities in direct sales or multi-level marketing.

The Details of the Business (Nitty-Gritties)

Opening shop with a direct sales company is much like opening a micro business of your own. Each company has a “buy-in”: usually it’s a kit of common items that a representative would sell in the normal day-to-day business. Sometimes the company requires a big buy-in, where you get a large kit of goods, and other times you can sign up for free, or a very small cost. Either way, the company doesn’t focus on this buy-in to make money. The range is usually between $10 – $300.00 to sign up. 

 

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I like to compare this concept to franchises. If you wish to operate a franchise, you have to purchase the rights to have that storefront. You pay money for the opportunity to hang out a well-known name, and to represent their goods. Think Subway, McDonalds, Starbucks, etc. All of these places charge for start up, and there is a head company who controls all of the franchises. (Which is why the BigMac is supposed to be the same around the world.)

No Big Bills

The direct sales companies handle promotional advertising and marketing.

This is ideal for a few reasons:

  1. The independent sales rep pays for this from a portion of sales made, and doesn’t have to put out thousands in advertising.
  1. The company can control the quality and quantity of the advertising.
  1. The company has a marketing team of experts who know what works and what doesn’t.
  1. The independent sales rep is not required to test the market, pay for advertising, pay for experts, etc.

Direct Sales Responsibilities 

The biggest responsibility that falls to the rep is to keep herself (or himself) organized; and build a customer base. Keeping customers happy on a service level is within the control of the rep, and the company takes responsibility for the rest. 

How to Make Money in Direct Sales

In most situations, the representative has options on how to make money:

Sales

A representative makes a base commission (or a set value) on the sales. This is no different than a car salesman! As the representative builds her sales levels, she makes a higher commission.

Commissions can be based on the size of the order, the amount of sales over a period of time, or on the items ordered. Each company sets out their own earning structure.

The representative is responsible to obtain sales materials, like catalogues, and any other branded items that she wants to use. While this comes from the representative’s proceeds, it is still a business expense that can be written off at the end of the year. 

Branded items, like pens or car wraps, are not necessary, but are a great way to get the conversation started. I have experienced sales firsthand just by having a magnet on my car stating what company I was representing.

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Teams (like Affiliate Training!)

Some companies offer additional commissions or rewards if you provide support to other representatives.

Much like affiliate marketing and training, you find a product that you support, and the company will pay you to promote the product. If others purchase that product based on your recommendation (or link), you are paid for your services. The company wins with your promotion of their product and you win by being paid.

Building a team with direct sales is the same concept. It’s natural to talk about your business, and to find like-minded individuals who want to sell the same products. By supporting these individuals throughout their growth as a representative, they are more likely to succeed, which makes the company money. In turn, the representative is rewarded by receiving a commission of the team member’s sales. 

The Pyramid Scheme Plan

It’s the model of the “pyramid” that makes people believe there is a hidden and  nefarious intention, but in reality, it’s a smart marketing move. As a head of any company, if I can motivate representatives to take on a team, support them and encourage success, why wouldn’t I pay an extra 2-10% of the sales? That’s worth it! 

Be Passionate

Choosing the right direct sales company is always key. My personal rule of thumb is to choose a company when you are passionate about their products.

Ideally, choose a company that you already use products from. I chose certain companies because I knew I would be buying the products anyways, and saving some money with a seller’s discount just makes good “cents”.  

The success of direct sales is often tied into selling items that people already buy. In the general population, who doesn’t buy soap, gift wrap, clothes, food containers, candles, books… we all buy these items at one time or another.

 

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Misnomers, Myths and Lies

Some misnomers about direct sales companies: 

– The companies encourage representatives to spam products on those around them.  WRONG.

This is very false. Most companies frown on spamming. When you see a representative “spamming” groups online, feeds, fliers, etc., you are seeing someone who is very excited about their products and their business. It’s more of an etiquette issue than anything else, but it’s no different than that vegan over there that tells you she’s a vegan every day. Oh, did you know she’s a vegan? (No disrespect to vegans!)

– You have to sign up your mom, grandma, sister and neighbour, otherwise you will not make any money. WRONG.

Good companies do not force representatives to sign up others. It’s a big responsibility to run a team, and to encourage them to continue. Having your family as representatives for the same company does not fair well: it means everyone is buying at a discount, and everyone is getting the same thing for Christmas, (ha) but really, companies do not force you to do that. Again, it’s the individual representative’s enthusiasm that is usually behind the push. 

– Very little pay for a lot of work. WRONG.

Like any business, side hustle or investment, it’s like pushing a rock up a hill. It’s a lot of work in the beginning, but eventually you will get up the hill. Keep at it. Then, when the rock crests over the hill, you know you’ve made it. It’s still going to be a lot of work to keep up with the rock, but you are finally seeing progress. 

You see, direct sales companies are modeled after bigger companies, and have many of the same traits. There’s payment for a job well done, and freedom to run your business how you see fit. Many people find their direct sales business fits into their life, as opposed to having their life fit around a business. 

Isn’t that the goal? 

When we naturally purchase these items as part of our daily life, it’s not unreasonable to seek out the best value. Prices are competitive everywhere, and depending on the product, they can be as readily available as if you had gone shopping at the store. The difference is customer service. You will never find a Wal-Mart employee who does house calls, or gives you fragrance samples with your purchase. Target doesn’t offer raffles, thank you gifts or camaraderie with the sales person, and you cannot rely that the same sales person will be there next week.  With direct sales, you have one person you are dealing with, and that’s what makes it special.

If you feel inundated with ads on social media, requests to host parties, or the office “pass the book around”, do not feel guilty by saying, “No, thank you.”

However, by buying from direct sales representatives, you might be:
– fundraising for a good cause
– helping a struggling mom fit her side business into her off-hours because she can’t get a second job with her schedule
– assisting a student pay for school
– enjoying a quality product!

Any side gig or hustle requires dedication and hard work, and some of these people work the hardest. I know some that have made a fulltime income from their home business. It’s very possible.

My intention today is to show you that direct sales are not what they used to be. They are simple, flexible, home-based businesses worked by people like us. They are not scams, and no more a risk of being a fly-by-night company than any other opportunity out there.

Watch the video below. Two people from Hamilton, Ontario launched a company selling tea mixes, and they pitched the Dragon’s Den. The investors jumped at the opportunity, and the expansion grew beyond anyone’s expectation. This is an example of a direct sales company. This could be yours.

I look forward to hearing what you think of direct sales companies, and if any of this was new to you, or changed your mind.  You can also follow me on Twitter, Instagram, or join the community page on Facebook.

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Do you get paid for what you sell?

EVERY DAY WE SELL FOR OTHER PEOPLE

Perhaps you think you don’t sell anything, since you do not get paid for it. Or maybe you do sell something, but you don’t realize what else you are selling. 

ADVERTISING

 

We advertise for companies every single day, whether it be the clothes we wear, the food we eat, the car we drive, and so many other ways that we do not even realize. 

Many times it is not intentional, like driving your car, or wearing a pair of black pumps. Recognizable brands, however, stand out. Retailers also add something for brand recognition: the fashion licence plate border that says “Bought at Joe Foe’s Auto Lot” or a pair of running shoes with a particular design. 

Are you getting paid for that? 

It’s time to turn it around. Marketing geniuses have made a killing by designing items that we use every day to influence current purchases, future purchases and purchases by friends and family. (Think Keurig.  How many people tried a Keurig for the first time at a friends’ house and had to have one?) This is not to say that the brands are not making a decent product, as many do. 

If you have a home-based business where you sell products, either handmade or from a catalogue, take advantage of your own marketing. 

Here are a few tips on how to do just that: 

– Use your car to advertise your brand. Get a sign for the back window (check bylaws and insurance to ensure you are not violating any policies) that says what company you represent and how they can reach you. 

– Do you carry a purse? Change it up. Wear a bag or purse that shows your brand or company. Use it to spark up a conversation while waiting for a bus or standing at the supermarket. 

– Give your products as gifts. Depending on what you sell, you may be able to advertise with a sweet product that you know people will love, and need more of. 

If you want to learn more about marketing your brand or company, check out my books on Amazon: MLM and Network Marketing and MLM and Network Marketing #2, both with 30 actionable tips to help you grow your business. 

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7 Questions about Real Estate Investing from New Investors

7 Questions new investors forget to ask about Investment Properties (Ontario, Canada)

INVESTMENT PROPERTIES 

Real Estate investing is a great idea. Start with a small investment, get a mortgage, and buy a property with plans of building equity from someone else’s money. It seems relatively easy – collect money from tenants, and fix the odd thing here and there.
 
That’s not the whole picture, though few people find this out before they are waist-deep in the trenches. Here are 7 questions from investors looking to enter the rental game:
 
**Readers: I am not a lawyer or a registered professional. I write from experience only, and will always recommend that you speak to a professional or expert. **

 

 

1. I’m a first-time home buyer, and I want to buy a property to rent out. Since I am a first-timer, I don’t have to pay land transfer tax, right?

 
Not exactly. If you are a first-time home buyer, the Ontario government does offer a rebate of up to $4,000.00* on land transfer tax, depending on a few factors. One such factor is that the property must be your primary residence.
 
If you are buying a property as an investment property, and not planning to live there, you will not receive the credit towards the land transfer tax. You are only eligible on your first purchase to get this credit, so choose wisely if it will be an investment property, a multi-family property or a single family home.
 

2. I am thinking of buying a condo to rent out. I hear that’s easier because there’s no outside maintenance to worry about.

 
Condos can be excellent rental properties, but there are a few things to consider before you purchase one.
 
A condominium is a unit within a building that contains other units. Some condo buildings are like apartment buildings, with many apartments in the one building. Each apartment is purchased by people much like yourself, and it is yours to do with as you please… to a point.
 
Think of the condominium building as a company, with all the people who own the condos as employees. The building (or company) sets out a board of directors whose job is to make sure the company runs smoothly. The directors are like bosses who are responsible for many different duties. Sometimes the condo corporation hires a management company to help take care of the condo corporation. There are also costs associated with the areas of the building that are public use areas, like the entryways and parking, and owners share the responsibility of paying for all of these tasks. The money is collected as “common expenses”, which is a monthly payment to the board. These funds are pooled together, and portioned into repairs, maintenance, utilities, management fees, etc.
 
As a condo owner, you are responsible to pay these monthly fees, plus any other special assessments that might come up. Much like home ownership, there are times that a repair is not budgeted for, and the owners have to pitch in extra money to fix the issue, like a new roof. You are also responsible for ensuring that all of the rules are followed. That includes tenants. If your condo building says that each owner may only have dogs under 30 lbs, and your tenant moves in with a St. Bernard, you may have an issue. If your rules say that you cannot have more than two pets, and the tenant has four cats, you may have an issue. If you are not allowed to dry clothing on a clothesline outside, and your tenant enjoys drying his tighty-whities outside on the balcony, you may have an issue.
 
While condos are relatively maintenance-free, you will want to ensure that you know what the rules and regulations are before you buy, and you will need to have a very serious talk with your tenant so they understand that all rules are to be abided by. You will also have to factor in the cost of your mortgage payment plus common expenses, and any normal in-unit repairs that you will need to take care of. You should also know that any violations of the rules may result in fines that are your responsibility at the end of the day.
 
Time to be honest: Tenants are not as invested as an owner, and usually don’t care what the rules are. Be forewarned that you may have some challenges with getting your tenants to follow the rules, and that it may cost you some extra money to get there.
 

3. I bought a great investment property in a neighbouring county. The tenants said they would cut the grass and shovel snow, but they only cut the grass once last summer. Can I enforce that they need to cut the grass at least biweekly?

 
Welcome to owning a rental property. In Ontario, you can ask the tenant to cut grass, shovel snow, pay for water, and anything else you want, but at the end of the day, there are certain responsibilities that cannot be enforced by a lease or agreement.
 
As a homeowner, you are responsible to ensure the grass is maintained according to the bylaw of the area, snow is shoveled within 24 hours of snowfall, and water bills are paid. While each area is different, and you should look into your own city’s bylaws, the average result is this:
 
If you do not cut the grass, or hire someone to do it, and your tenant fails to do it, the city can come by and cut your grass for you. They will bill it to your taxes, and it will likely cost you $300-$400 for that courtesy.
 
If you do not have the snow removed, the same type of thing can happen. You can be fined, you could have your mail rerouted as undeliverable because of safety hazard, or you could find yourself liable for someone falling and hurting themselves.
 
If your tenant agrees to pay the water bill, and then absconds without doing so, that unpaid water bill can and will be applied to your taxes in most areas. Water bills traditionally stay with the property, and not with the account holder.
 
Takeaway: Grass cutting, snow removal and water bills are your responsibility, regardless of what the tenant agrees to do. You may have some recourse on the water arrears, but at the end of the day, you will be left holding the bill. Make arrangements to ensure these items are taken care of, by hiring a property manager or a local individual or business, and follow up.
 

4. I am looking at having investment properties, but I don’t want a tenant who smokes. Can I enforce this?

 
Good question! Short answer is No.
 
The Residential Tenancies Act is the rules and regulations that govern the landlord/tenant relationship in Ontario. The “RTA” does not discuss smoking at all.
 
As a landlord and property owner, here are some points about smoke in your units:
– If the unit shares an air exchange with another unit, it may be fair to require no smoking, if someone in one of those units is allergic or has a medical condition affected by smoking.
– If the unit is damaged by smoking, like stained walls, heavy smell, or burns, you can seek damages from the tenant as normal wear and tear would not warrant such damage.
– If the tenant smokes heavily, and it affects another tenant’s enjoyment of their home, you can seek assistance from the RTA tribunal to get an order to enforce a no smoking or regulated smoking area for the first tenant.
 
When interviewing potential tenants, take note of as much as you can. You have the right to not rent to someone if you choose. While discrimination is illegal, choosing another tenant who is a better fit is what you want to aim for. Err on the side of less is more when letting a potential tenant know their application was not approved.
 

5. Is there a difference between owner-occupied and tenant-occupied insurance?

This is a great question to ask your insurance broker. There is a very big difference between a home that has an owner living on the property and one that houses a tenant. Owners tend to care for the property more than a tenant would. Owners usually maintain properties better, and take more responsibility in making the property a safe place for both residents and guests. Tenants, on the other hand, may not care so much about repairs, maintenance or the type of guests that are in the house. I am not saying that all tenants are evil-minded trolls who lust after ruining properties, but it’s true that we take care of things we own better than the things we do not. It’s also true that some tenants are gems, and make each rental a home. Unfortunately, that is not the norm, so your insurance company wants to make sure they are insuring the right way.
 
If you had an owner-occupied policy (one that says you live in the house), and you do not, the insurance company may have the right to deny any claim you make. Be sure to tell your insurance broker that the terms of the living arrangements have changed, and there is a tenant living on the property. Insurance price will likely increase, but it’s still much less than losing your investment and still having to pay back a mortgage.
 

6. Does my mortgage company need to know if I rent out the house?

 
This question is much like the insurance question. Again, I recommend speaking to your bank or a lawyer about this, however here is an example of what could happen.
 
Let’s say you are Ms. Moneybags, and you lend Joe Smith $500,000.00 to buy a house for Joe, his wife and his three littles to live in. You have checked out the house, and you feel it is a safe investment. Joe and his wife have stable jobs and decent incomes, and you are satisfied that you have made a sound investment.
 
Six months later, you drive by your investment. Instead of seeing Joe and his wife at the house, there are 5 cars at the property. Two of the cars are parked on the front lawn, and there are young adults playing frisbee on the front yard, between the cars. There are party supplies in the driveway, and a “bedroom for rent” sign in one of the windows.
 
You call Joe to see what’s going on with your investment. It doesn’t look like things are going well. In fact, you wonder if Joe was kidnaped and someone took over the house.
 
Joe says that he and his wife decided to stay in their old home, and rent out the new one to students. Joe says that the university is just down the street, and lots of houses on that street are rented out.
 
Ms. Moneybags is not happy. See, Joe has misrepresented his situation, and you approved the mortgage because you had weighed out the numbers. Joe and his wife could afford the house, because they did not have another mortgage or rent payment. With Joe’s current rent amount, they cannot afford to pay both. What happens if the house is damaged by the tenants, or if Joe cannot find new tenants? What if the tenants don’t pay? That means Ms. Moneybags doesn’t get paid, and the house that was a good investment is no longer worth the same amount it was when the money was lent.
 
Ms. Moneybags is not happy, and asks for her money back, forcing Joe to sell the house.
 
While this example is made to sound extreme, you can see why the bank cares who is living in the property, and the bank usually will instruct you as to this. “Owner-occupied” mortgages means that the bank does not want the residents in the house to be tenants, and it also means that the bank has assessed your finances based on you living in the house.
 
I am not suggesting that it is up to the bank to make the decision for you, but there are other mortgages and products that you can seek which are for rental properties. It is possible for a lender to find out that a property is not owner occupied, and it is possible that the lender could call the loan, meaning you could be forced to find financing elsewhere or sell the house because the lender wants their money back.
 

7. I am looking at a single family home that would make a great triplex.  Before I put an offer on the house, what do I need to consider?

 
What a great investment! A triplex means three units of tenants, which can mean less chances of having an empty house with no income.
 
If the house is not a converted building already, the prudent thing to do is to look into the zoning for the area. Zoning is like a code that the city assigns to each neighbourhood and section of a city to ensure that a big box store isn’t built next to a foundry, which is next to an elementary school, a train station and four single family homes. You will want to see if the area has zoning for multi-family properties. Some will only allow single family homes, some will allow homes and small commercial buildings, and some will allow a mix of specific properties. If your area does not allow for multi-family properties, you need to know that before you start renovations, as the city could force you to close up shop if you violate zoning. This is step one.
 
So let’s say that you have received a go for converting your house into a triplex. You plan a wall here, an entrance there. You will need to look into things like:
 
– Permits for the renovations
– How can tenants get in and out of the unit if there’s an emergency?
– How big do the windows need to be? Do you need to provide access outside the building, like a ladder, if the alternate exit is a window?
– How many square feet are required for a legal unit?
– Do you need to have the smoke detectors and carbon monoxide detectors electronically linked to the fire station, or will battery operated detectors work?
– Do you need to upgrade the electricity? Do you need to meter out the utilities? How much could that cost you?
– Do you need more parking? How close are your neighbours? Will they complain about how your renovations might affect their property and property values? Do they have a valid point?
 
Don’t forget about inspections! Read more: 411 on Home Inspections: 5 Experts Weigh In
This is just a beginning list for the considerations of turning a property into multi-units. It’s not meant to be discouraging, and can be done quite easily with the right preparation. So before you start converting your basement and attic into units for people to live in, make sure you are meeting the requirements for safe living spaces, and for keeping your neighbours happy. Happy and safe tenants make for happy landlords.
 
 
I hope these questions will give you more insight into what being a landlord and property investor is all about. If you have more questions, please send them to me in the comments below, or to reach me here.                                                                                                                                                                                                                

 

Investment properties

Recommended Reading: 

Save My Rental: What You Need To Know About Tenant Selection

Mandatory Lease in Ontario: What You Need To Know

Making Housing More Affordable for Renters and Owners

 

This post may contain affiliate links, meaning, at no additional cost to you, I may earn a small commission if you choose to purchase through these links. Please see my disclosure for more information. Amazon Affiliate Disclosure: I am a participant in the Amazon Associates Program, an affiliate advertising program designed to provide a means for me to earn fees by providing links to Amazon.ca and affiliated sites.