Buying A Franchise Vs Top Tier Direct Sales Business

Many people seem to think that buying a franchised business may be the way to own their own business, thereby owning their own future and securing financial independence.While this may be true for some, franchise ownership comes with it’s own set of inherent issues, some of which fly directly in the face of owning your own business and being your own boss. Let me say up front that I am not against franchising, I just believe that owning a franchise may not be for the true blue entrepreneur who must have total independence.

But let’s start at the beginning.

I have 2 friends who invested in a Direct Buy store. The capital required for start up was $300K for the franchise fee, $750K to acquire space and build a showroom, and they are required to pay a 22% royalty on sales, ostensibly to pay their share of corporate marketing, advertising, etc. Boom, right out of the gate you’re in the game for $1,000,000+. With the above business model, they sell a membership which gives people the opportunity to buy directly from over 700 manufacturers at confidential insider prices, just like the stores do. A sales staff must be hired and trained in sales. Meaning that the store owners, must already have or be willing to learn the necessary sales skill sets. Which also requires further investment in time, material and resources. The truth of the matter is that whatever type of business one starts, you should always be learning how to sell.

As in many small businesses, revenue must be grown and reinvested in the beginning. Which means that if you’re smart, you will put yourself on a minimum salary for anywhere from 2-5 years, until the business can actually support paying you a profit. Not in all cases, but in most. And most franchise companies won’t provide actual, real time information regarding the earnings potential. And if they do, they will generally use numbers before any expense deductions. That’s just not very helpful when trying to decide to invest a boatload of cash into a franchise.

So we’ve covered high start up costs and questionable profitability.

Keep in mind that in the above example, we’re not even talking about a McDonald’s store here folks. Not even a Burger King or Wendy’s. A McDonald’s start up can run between 500K and upwards of $3 Million, depending on the location. Now, if you already own a corporation that can support that kind of up front investment, this type of arrangement can make sense. But if you’re an individual with somewhat limited capital, I believe that investing in a top tier direct sales business is a much smarter investment.

Another factor to consider is that when you buy a franchise, you’re not just buying the right to use the franchisor’s name and a store, you’re buying the business plan as well. You’ll have to adhere to the design, price and appearance standards of the company in question. This limits the way that you are able to operate your franchise. This can help promote uniformity, however if you are a true entrepreneur, this will severely limit your creativity and independence, usually a death knell for the serial entrepreneur. Having said that, if you’re the type of person that needs to be micro managed and told what to do,how to do it and so forth, it might work out for you.

As far as royalty payments, it is what it is. However, keep in mind that these payments will eat into your profits.

Most companies have post term competition restrictions. Meaning that if you decide to open your own burger joint after a few years, due to standard non competition clauses, you would not be able to open a similar business after your agreement has run it’s term. In effect, you may be unknowingly limiting your opportunities to do business for many years after the expiration for your contract.

And there is also the chance of unfair termination. The slightest impropriety on your part, even unwittingly, may constitute cause for the franchisor to terminate it’s agreement with you. These include, but are not limited to, being late on a royalty payment, violating standard operating procedure or many others. And if you’re store happens to be not as profitable as a franchisor would like, trust me they will look for ways to pull the plug, leaving you no recourse. Now, in all fairness, most franchisors are not this strict but the possibility of losing your entire investment is a scary possibility.

There are other considerations also, such as encroachment, advertising fees, lack of legal recourse, and more.

Now let’s compare this to a top tier direct sales business. In most top tier direct sales models, there are different investment levels. This would be comparable to owning one corner versus another in a franchise model. Better location equals higher investment. For the purpose of this example let’s assume that there are 3 levels of investment:

Level 1: 1695.00 = $1000.00 Commission on the sale of this product.

Level 2: 8995.00 = $5000.00 Commission on the sale of this product.

Level 3: 14,995.00 = $9000.00 Commission on the sale of this product.

Total investment at all 3 levels = 25,685.00

Total Commission on sale of all 3 products = $15,000.00.

Let’s assume that you start at the top level and invest 26,685.00. This entitles you to commissions on all three products, meaning that if you sell all products to one customer, you earn $15,000.00 in total commissions. Two sales recovers your total investment. For the sake of simplicity, let’s say the cost of these two sales is 10% of the total commissions earned or 1500.00. This is an extremely high number, so that we can keep your ROI conservative. You’ve still recovered your initial investment back and then some, in only 2 sales. Also, there are negligible overhead costs, as you are working from your home office. In fact, these costs should be tax deductible, but I’m not a tax professional so be sure to check with yours. If you are doing what is taught, you should be able to recoup your initial investment within 60-90 days of getting started, most people sooner. After your initial 90 days you will have you’re sales funnel full and should begin seeing 1-2 sales minimum per month. Let’s assume that you make only sale of all three products per month per month for the remaining eight months after your 90 day start up period. 15K in commissions per month times eight months equals 120K, plus your original 30K in commissions that you earned in your first 90 days equals 150K. I’m no rocket scientist, but a 150K ROI from a 26K investment in 12 months is pretty impressive. From year two on, your direct sales business should be producing 250K or above in revenue. There are those who earn in excess of seven figures in this industry.

Quite obviously this doesn’t just happen, there is work involved. You must be working on your marketing, sales skills, etc. Some organizations offer total marketing support, even systems that can accelerate your marketing and sales efforts. We offer our associates a full marketing suite as well as full sales training and mentoring. We use a selling system known as Natural Selling, which is a dialogue based selling system. This is another point. What is your concept of selling? What if selling isn’t what you thought it was? What if there was a way to sell without the tension, stress, pressure and objections associated with traditional selling? There is and it’s what we teach.

So, as mentioned earlier, the potential ROI relative to capital invested is quite substantial.

There are many other advantages to operating a direct sales business from home. Such as no need to hire and baby sit high school kids. No royalty fees and other associated franchise ownership costs. The biggest benefit for me is the total independence that working from home provides me. No corporate messenger boy stopping by to tell me that my bathroom floors are not up to company code. (Don’t misunderstand, I’m all for clean bathrooms, just using an example.)

The fact that I get to take and pick up my grand daughter up from school is a huge bonus. And when she rambles her pretty little self into my home office to give me a hug, that’s pretty awesome too.

To your success.

Tips on How to Make Your Direct Mail Marketing More Effective

Some online marketers are overlooking the fact that direct mail marketing is very effective in promoting a business. It can now be done both offline and online. Let us discuss some direct mail marketing techniques that will definitely boost your company’s success.

Use postcards. Postcards are powerful tools you can use to encourage people to take positive action. Unlike a regular letter, they do not have to be opened so you can be sure that the recipient will see it. They contain short, simple messages that are quick to read and easy to understand. You can use some designs that will help in attracting more people’s attention.

The cost for creating, printing and mailing one postcard is far cheaper than a business letter. Since you are not going to use an envelope, it only means that you can save more. Furthermore, advertising with postcards make it easier for entrepreneurs to track the results of their campaign.

Offer a discount or a free gift. People love to receive discounts or freebies. The postcard you send out can also serve as a discount coupon or a voucher which will help them claim the free gift. The customer can simply take the card to your store to enjoy a discount or a freebie from their purchase. Or you can include a discount code that customers can use on their check-out from your online shop.

Offer a free trial. Offering free trials is one way of getting people’s attention and trust. It shows that you are confident about the quality of your products and services. It eliminates the risk so a customer would feel more at ease to accept your offer.

Use a personal tone. Avoid using a sales pitch that sounds like pure advertising. Instead, make your tone personal and friendly, as if you are speaking in front of a customer. Stress the benefits of what you offer. What’s in it for them? However, be careful not to overdo the sales talk. The subtle approach is usually more effective.

Use call-to-action words/phrases. Do not forget to use call to action words or phrases that tells the reader exactly what you want them to do. Should they check out your website? Order through telephone? Or visit your nearest store? Don’t leave your readers guessing. Give them exact instructions on what to do after they have read your postcard.

Use easy to read font. There’s no need to give your readers a hard time looking at your message. Choose a font style that is just the right size and is not straining to the eye.

Repetition is the key. Repetition is important. It is advisable to use a call-to-action phrase at the beginning, middle and end of your marketing copy. Don’t be afraid to repeat call-to-action words in your copy.

Use bulleted lists. To maximize space, use a bulleted list to highlight your main points or emphasize important ideas. Unnecessary words can be omitted since the list does not have to contain complete sentences. A reader can simply scan through the list and still understand what you’re trying to say.

Best Methods of Advertising Internet Marketing Business

In the world of e-commerce or online marketing, competition is truly extreme. In order to survive, an online merchant needs to be aware of the best internet marketing strategies and be able to execute them correctly. Using the wrong online advertising methods or poor execution can bring frustrating results. In this article, let us talk about two important internet marketing strategies for small business owners:

Promote Your Business Through Social Media Advertising

If you regularly use the internet, then perhaps you are already familiar with Social Networking communities such as Twitter, Facebook, MySpace and YouTube. Indeed, these social sites receive millions of visits each day from people of all ages, from all over the world. Thus, you can imagine how being a part of Social Networking Communities can help enhance your business marketing potential.

What are the advantages of participating in Social Networking Communities? Check out the following:

Build brand name recognition and strong image for your company.

Build stronger relationships with your customers.

Find a huge number of prospective customers or quality leads in one place.

Become more accessible to your market.

Try to interact with your niche so you can get to know their opinions about your company and/or product.

Benefit from the “word-of-mouth” done over the internet. If buying customers are satisfied with the quality of your products, you can be sure that you will earn positive reviews from them as well.

Promote Your Business Through Direct Mail Advertising

Direct mail marketing is a form of advertising that has been used by many businesses for a long time. Now that e-commerce has become popular, direct mail advertising through emails has proven to bring promising results for both big and small business owners. Actually, offline and online direct mail marketing techniques can be combined if you aim for better results. Below are the benefits you can get from direct mail advertising:

First of all, direct mail business advertising is one of the most cost-efficient methods which make it ideal for small businesses or entrepreneurs working on a limited budget. If you do not have a big budget, you can start with a low budget by sending postcards or emails to a small group and plan your next action based on the results.

You can customize the message you will include in your postcards or emails depending on the niche or group of recipients you are targeting. Since people may have different responses to marketing campaigns depending on their interest, age, or income bracket, a business owner can choose an approach that will initiate the best response from each group.

Flexibility is one thing that makes direct mail advertising more effective. Separate direct mail marketing campaigns can be launched targeting specific niches or groups. Direct mail marketing campaigns can be launched for different purposes. For instance, a business owner can send postcards or emails to a targeted market to introduce a new product, announce a sale or a big shop event, offer discounts, follow-up on customers who have previously bought from the shop, etc.

Copyright (c) 2010 Luie De Von