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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Mortgages: Answers To Your Questions!

Mortgage Questions Commonly Asked

It seems easy: go to the bank, get a mortgage, and go buy a house. Home owners are happy to be home owners, and in the moment, there are so many terms and documents that it’s overwhelming. Here’s a few questions about mortgages often asked by home owners:

(Wait! Need to know how to buy a house or property? Start here.)

 

CHARGE OR MORTGAGE?

1. Terminology: I hear my lawyer refer to my mortgage as a Charge, but my bank calls it a mortgage. What is the difference?

A mortgage, or a charge, are essentially the same thing.  A mortgage is registered against a property in exchange for the money that is lent to you by the bank. In easier terms, a mortgage uses your house’s value as a collateral, much like a car loan is based on and against a car. The reason why you will hear “mortgage” and “charge” interchangeably is because the registered document against the house (like your deed, but that’s for ownership) is called a Charge.

 

IS A LINE OF CREDIT A MORTGAGE?

2. My bank is giving me a line of credit, which I can use when I want. I have already paid off my mortgage, so this is in case of emergencies. Why do I need a lawyer for this?

A line of credit (also referred to as a LOC or HELOC, being a Home Equity Line of Credit) is a product that is normally high in value, and is registered against the property to secure the value. A conventional mortgage gives you a lump sum once, and payments are made over a long period of time. A line of credit allows you to borrow money, pay it off, and then borrow again without asking the bank to renegotiate your borrowing terms. Many lines of credit are not tied to the house, but one that is usually offers much lower interest rates, and much higher available balances.

You will need a lawyer (or a closing company) to register this line of credit against the house, and the document is still called a Charge. Anything leveraged against the property, like a line of credit, a reverse mortgage, construction mortgages, or even a regular collateral or conventional mortgage, is registered as a “Charge”, and is considered a mortgage.

 

WHAT DOES IT MEAN TO BE PRE-APPROVED?

3. I am buying a house, and my real estate agent recommended I get “pre-approved” for a mortgage. What does that mean?

A pre-approval for a mortgage means that a bank (or other institution that lends money) has looked at a current snap-shot of your financial situation. The lender looks at your current debts, your income, length of time at your job, your credit score and repayment history, and how much you are willing to pay towards a house. The lender then determines of you can afford what you are asking for, and if the lender thinks you can manage that debt, they will offer a pre-approval. The pre-approval is never a sure thing, or a guarantee for a mortgage, but it means that at that moment, and if everything presented to the lender is absolutely accurate, the lender would be willing to lend you the money.

 

SIDE NOTE ABOUT PRE-APPROVALS

I am not of the intention to create widespread hysteria, but I will add this: any differences to what you told the lender on the application from what is the real story may result in the lender not lending you the money. The lender also has the option to change its mind. A pre-approval is not a promise or a guarantee, but that the lender has agreed to lend you the money as everything stands at that moment, and provided the property (or house) is suitable for collateral.

It’s rare, but there are times when a lender changes its mind or withdraws the pre-approval. However, pre-approval at one lender usually means that there is another that is willing to do the same. If the lender pulls funding, don’t panic as there’s still time to correct the situation, and always, always, always discuss this with your lawyer and your mortgage contact.

 

HIGH-RATIO MORTGAGES: WHAT ARE THEY AND HOW DO THEY COST ME MONEY?

4. What is a high-ratio mortgage, and how do you calculate loan to value?

The first step in this equation is knowing the value of your home. In the beginning, you will assume that the value is the price you paid for your home. If it’s been years since, or extensive renovations have been performed, the value may have changed. However, for this example, we will say that the house is worth $500,000.00.

A high-ratio mortgage is any mortgage where the principal (the amount borrowed) exceeds 80% of the value of the home.

80% of $500,000.00 is $400,000.00. (500000 x .8)

This indicates that a mortgage that is $400,000 or more placed on a home of that value will be a high-ratio mortgage.

Any time you borrow 80% or more against the value of a property, the Canadian Mortgage and Housing Corporation recommends that the lender obtain mortgage insurance, in case you cannot pay your mortgage. The insurance is at your cost, and is usually held by CMHC or GE Insurance. You will pay 2.8% – 4.5% of the value of the mortgage for this insurance, plus applicable taxes.

 

Example:

You are purchasing a house for $500,000.00 but you only have 5% to put down as a down payment. This means you will need to borrow 95% of the value of the home in order to purchase the house.

At 95%, the principal amount of the mortgage will be: $475,000.00.
High ratio mortgage insurance is calculated at 4.0 – 4.5% of the principal amount. (Assuming a traditional down payment of $25,000 coming from your savings account, we will use 4% as the cost.)
4% of the principal amount is (475,000 x 4%) is $19,000. Depending what province you are in, there’s 8% tax collected on that amount as well, which equals $1,520.00.

Your 95% loan-to-value high ratio mortgage cost you an additional $20,520.00, raising the cost of the house to $520,520.00, plus adjustments and legal fees.

This is why you hear professionals and other financial experts recommending that you have a minimum of 20% to use as a down payment on a house. Sometimes that’s not feasible, or perhaps you cannot see coming up with $100,000 to put down on a house, so you obtain a high ratio mortgage. The more you can put down on your home, the lower the insurance cost will be.

 

WHAT’S THE DIFFERENCE BETWEEN THE BANK MORTGAGE GUY AND THAT GUY DOWN THE STREET?

5. What’s the difference between a mortgage broker and the mortgage specialist at my bank?

Each institution/bank has their own in-house mortgage agent who promotes and qualifies clients for the products within that bank. For example, let’s say you bank with the Royal Bank of Canada (RBC). If you walked into RBC to apply for a mortgage, the agent or representative would assist you in applying for a mortgage with RBC. Usually, the agent is only able to offer products with RBC – as RBC is their employer.

An independent mortgage broker or agent works for a brokerage instead of a major bank. This agent will meet with you, and take your application, same as a bank agent. The agent will contact different institutions with your information (and consent, of course), and tells these institutions that you are looking for a mortgage. The institutions have the opportunity to deny or accept your application. This agent is paid by the accepting institution or by you, depending on the situation.

 

Which option is better?

I’ve heard this question asked over and over, and the answer is different with each person. With respect to reaching out to your banking representative, you may have a relationship with them, and you may be comfortable keeping all of your financial “eggs” in one basket. Maybe it’s easier to deal with one bank, and that’s completely understandable. An independent agent can find more opportunities without pulling credit each time, and they may have a relationship with an institution that specifically does business with people who have a credit score like yours. Maybe they are more lenient (if your late payments are still on your report) or maybe they offer a discounted rate (only for people with your stellar credit rating). Both have merits.

Before choosing, ask for recommendations and referrals. See who you are most comfortable with, and make sure you know your credit history before you start. If you know that it might be a finesse-requiring situation, an independent agent might be better. If you have near-perfect credit, you can likely walk into any bank and get exactly what you need.

I hope I have answered some of the questions that you may have, and it’s such an exciting experience when buying a home that it’s easy to forget what terms mean, or what was discussed. Send me your questions, and I will answer them as best I can.

(Questions about real estate investing? Click here for more.)

 

Don’t forget:

If you want to learn more about the topics we discuss, add your email, join me on Twitter as XennialBlogger or on Instagram as XennialBlogger. (Click the links for easier access!) 

 

Mortgage Questions Commonly Asked
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How to beat procrastination

How to beat procrastination:
Prioritizing when life gets overwhelming

It has been much too long since I wrote a new post. I have been working on one of my resolutions or goals for the new year: to move my site to WordPress, which would allow me more functionality than the free host site I was using. In the process of doing that, I also re-branded, and changed the direction of some of what I am working on. Talk about an overhaul!

Where we came from

BendNeverBreak was started at the end of September, so I thought that there would never be a better time than now to change my blog to reflect what I am working towards. While BendNeverBreak reflected my love of all things ocean and palm trees, and the inner strength of the Palm Tree, it occurred to me that Xennial Blogger describes me, my audience, and the people around me so much more.

The Xennial is a child born (roughly) between the years of 1976 – 1985, and were raised in an analog world. Even the word analog isn’t heard much by the millennials these days, as it pertains to the life we lived without remote controls, cell phones (that were not huge!), and even portable calculators and hand-held games. As our childhood ended, and we were launched into adulthood, we discovered that the world had become automated by computers. It was almost an instant change, where we had our rudimentary skills put to the test almost instantly, and never stopped running alongside technology since.

This is the challenge that we face. We are too young to be true Generation X children, and we can’t relate to the Beta days and records as easily as they can. We don’t really understand Millennials and their choice of words (woke?) as easily as they do, as we are still old-school in our habits. However, we have been living between the two stages and finally recognized as Xennials. 

The change in the website doesn’t exclude either Gen X or Millenials, but embraces them. I want to speak to those who are new to understanding money – beyond the pay-cheque to pay-cheque.  I know you come in all ages, sizes, colours, etc… and we are all learning together. Trust me, not everyone has a 401k or RRSP started by the age of 30 or even 40, or even 50. Sometimes it doesn’t happen at all. So let’s not make it about not having the information, because this is the place to get it. 

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Cuban Turtle Illustrating Life At Its Best

Where we are now

Back to the topic at hand: PROCRASTINATION.

I love my Sunday mornings. On Sunday, I usually have most of the day to myself, and it’s a day for me. Much like many other families, I work on laundry, make food for lunches over the next week, write a post or two, play on Pinterest, watch a movie or simply cuddle with my dogs. It’s the day before my week begins again, so I just take it slow.

Today is no different. I planned to write, reformat the posts that did not convert well, do some reading, and just be productive. So far, I have started homemade soup, slow-cooking a rack of ribs for dinner tonight, had breakfast, cuddled with pups, napped… and it’s 10 am. I have not done a thing on my to-do list for today.

I’ve been procrastinating.

Many of us have found ourselves listening to the voice whispering that you should check on Youtube for the newest videos that you subscribe to, or it would be easier to start with something easy, and work your way into that room, or you can’t start a project without all the tools, so you must go shopping to get the tools first, and start after you get back.

So many excuses!

The biggest hurdle for me is right when I am in the beginning steps, and I look around and realize how much there is to do. I start to feel overwhelmed, and I step back. Further back. Like, another three steps. And then go work on something else.

NO MORE!

In order to beat this feeling, grab a pen and a piece of paper. Sit down, and take a breath. Write down all the things you want to work on. No matter how big or how small, just write it down. Is it down? Now stand up. Go work on one of those. Start at the beginning, and tell yourself – you can only go step by step, and bit by bit.

If you are overwhelmed by dusting your house – start in the upper corner of the left part of the room. Go to the closest piece that needs dusting. Keep going around the room. Only dust. Do not get distracted by the book you have to put away, or the fact that the shelf needs one more thing, or that the TV is angled weird. DUST. You will soon be done. When you are done, you will find it was not as bad as you thought, and that staying on track allowed you to get the dusting done.

One Step At A Time

Anything in life can be broken down into steps. By taking dedicated steps, you will always be able to accomplish your goals. The list is a reminder of what you are wanting to accomplish. You can accomplish anything, if you stick with it.

I’m also willing to venture out and say that it wasn’t as hard as you thought once you started, was it?

I have made it sound very simple. It really is. When you try this method, you will notice it works.

One more tip for today:

Reward yourself. After you have accomplished something on your list, be sure to mark it off (that in itself is rewarding) then make a cup of tea or a cold drink, and take ten minutes to relax. (Set a timer if you are afraid you will not get back up in ten.) Tell yourself how well you did, and how much easier the rest of the tasks will be, now that you have mastered beating procrastination.

 

If you have other tips or questions, I’d love to hear them! As always, please share this post with friends if you found it helpful, and be sure to subscribe below.