Forums: Discussions for entrepreneurs and small business.

Although I`ve been registered on this site for sometime, I`ve only today really had a good look at the impressive resources available.  Therefore, I`ve decided to try out this forum.

I am in the process of organizing an independnet rep network to help sell my line of skincare.  The network would be involved in direct sales to friends and family on a part time basis, however opportunity exists to develop a much larger business by having tables at events, home parties, etc. for those who want to work it.

While this sounds a bit like the traditional Mary Kay thing there are differences.  1) Our products are more high end

2) This is not MLM

3) We prefer, but are not specificly require that participants be the type of people interested in socially responsible causes

4) We are not looking for the reps to make a large commitment to buy products and carry inventory

etc,etc.

My question to the group is if anyone has and can share ideas and/or experience with recruiting best practices for type of thing.  To date we have had some success with one on one presentations, but now we`d like to step it up on a regional and national basis.  Any replies would be most appreciated!! 

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Randy Kravitz
Managing Director
Juvenesse by Elaine Gayle
www.juvenesse.com

Most people don`t want to sell for a living! Keep this mind as it`s a serious and significant obstacle with most people. If you`re looking for sales representatives from family/friends/etc and not dealing with professionals, you will have to keep this in mind.

Second, I wrote a post that touches on this topic here. Yes it deals with this question from the MLM angle but there is information about consumer behavior and network models that you might find useful. Hopefully there will be more discussion.

OK cookie, I read your post and the post you linked to and I will admit that I don`t understand much of it. I was a history major in college, not a business major. What the heck is `skew`?

Juvenesse - I just attended a party where the product was jewelry made by African women and the the profits from the sale of this jewelry went to some form of humantiarian aid in Africa. Most guests felt compelled to buy even if it was just a little.
How are you differentiating yourself from MLM?  Do you want the reps to sell retail to the public or wholesale to the trade?


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Sharon Murphy
Owner
Northwoods State of Mind, Inc.
NorthWoods

Thanks for the nice message! I will try to clarify, but should disclaim: this is a quick post on a subject that has been covered by many thick books, so there will be a gap or three in this info!

Skew is simple ---

1. Shallow skew. A volume sales model. Lots of customers buying lots of items. Though the profit on each item might be small. Target stores. WalMart stores. Grocery stores.

2. Deep skew. Far fewer customers buying one item. The profit on each item might be several hundred or several thousand dollars. Car dealerships. High end electronics. Furniture stores.

Skew & Risk & Cash

There are pluses and minuses to each model, especially when it comes to risk management and the interaction between risk management and cashflow and between cashflow and costs, fixed or otherwise. Generally speaking, you have less cashflow risk with a higher transaction count, because statistically speaking, the odds of suddenly losing a big chunk of your customer base are much smaller.
This means you have a large network of customers and changes to one section of the network are less likely to affect other portions. Think of it like the phone company. Since they have millions of customers, it doesn`t matter if they lose thousands of customers. But they only make a little money from each, so they have huge risk with respect to cost changes that spread across their customer base.

However margin risk is much much higher with shallow skew. Most markets are subject to natural price fluctuation, from direct or indirect market forces. When your margins are smaller [ dollar wise, not percent wise ] you are much more at risk of cost fluctuations reducing your margins. If you make $1-$5 on thousands of items, a 50 cent increase in costs per item, reduces your margins between 10%-50%. These are huge numbers that will be spread across your entire range of transactions. So with risk better distributed, you also have to take into account that the risk can affect more areas of your operation. [ This has its own almost never-ending series of pluses and minuses. And again, here I write a few sentences against the thousands of pages devoted to this in books! ]

On the other hand, if you sell cars, you have another risk. Since you have fewer customers, it is statistically more likely that you will lose customers and each customer`s contribution to your annual profit is much higher. But if you are making several hundred or several thousand dollars per sale, you have much more insulation against nominal cost fluctuations and since your risk is less granular, it has less chance of spreading through all your transactions. Think of this like a super expensive and exclusive phone company with only a few thousand users. In this case, if 100 of 3000 customers go elsewhere, it is indeed a very big deal for cashflow and profits. But on the other hand, it doesn`t matter if costs go up slightly. There are fewer risk units here, so risk is more concentrated. This has pluses and minues.

This post does not address many other important factors, but I am trying to keep this simple!

I should also add --- but I don`t want to take this thread badly off course ---

Entrepreneurs are very cost sensitive. They know that liquidity is a great way to hedge against broad business environment risks. In fact, most entrepreneurs believe [neither rightly nor wrongly] that maintaining liquidity is the only practical hedge against cashflow risk, margin risk, time risk, capital risk, cost risk, labor risk, project risk, non-payment risk, etc.

That said, a desire to conserve cash in an effort to guard against risk has many bad side effects all on its own. I`ve seen lots of people on SUN who have went through a lot of work to develop a business, only to sabotage their $25,000 or even $100,000 investment by doing their web site themselves, resulting in no sales. Same goes with homespun marketing/copywriting, which is usually a complete disaster. A rigorous analysis of the risks involved [ spend $4000 for a web site -vs- venture failure ] would of course show the total and utter common sense in paying for web design. But hardly anyone - myself included - is really good at quantifying risk. I can`t even begin to tell you all the mistakes I`ve made in this area. It would be awfully long and quite depressing list.

One of the rarely-ever-mentioned keys to success as an entrepreneur is learning how to measure risk and design a business and business processes, that take risk into account and make it survivable. Redundancy is one way. Hedging is another. For example, you can hedge the risk involved in paying for web design by using payments. This better manages risk of capital against risk of non-completion. Or you can sell products from various suppliers instead of relying on one supplier ... even though it`s far more convenient to use one supplier. What happens to your margins if they raise prices? Much less likely that all your suppliers will raise prices at the same time.

I thoroughly understand the concept of `skew` thanks to your explanation. There are so many pitfalls when starting your own business, whether you have a business degree or not. Assessing risk is something that we all think we do well, but in hindsight we see and understand our mistakes. This is why mentors come in handy, they can teach us what they learned the hard way in hopes that we won`t repeat their mistakes. Juvenesse seems to want a certain business model that is similar to MLM but not exactly like it. Should she not find a business model that is close to what she wants and find out where and how they were able to expand their market? It seems to me that for her to effectively recruit and keep active sales reps then she needs to be offering them not just an easy way in but incentive for them to stay on board. With MLM the incentive is usually that you start to get a percentage of the sales from other people who join after you. What can Juvenesse offer people to make them join and make them stay? If this is well defined then recruiting will be much easier. 

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Sharon Murphy
Owner
Northwoods State of Mind, Inc.
NorthWoods

Thank you for the dialog Cookie and Smurph.  These are all great issues which a little more information from me will make this either more or less confusing.

As a higher end cosmeceutical line our business would align itself with Cookie`s Deep Skew model.  We intend to keep and perpetuate this model since this, coupled with our commitment to social responsibility sets us somewhat apart within the very crowded skin care marketplace.

One of the attractions of this business was that it has always had a loyal following and has certain cash flow from existing customers, while having no specific sales model we had to follow because of current contractual rep relationships.  To date we have certain independent reps that we have used to help develop our program, which is currently in a beta test environment.  Ideally we will end up with independent reps, the internet direct to consumer and professional reps into spas and salons.  The possibility exists for channel conflict, but we`ll cross that bridge later.

I agree with the fact that MLM offers a built in continuity and growth incentive, but from I can see from a monetary standpoint, en mass, it is dissapointing.  I believe we will experience high turnover and will need to continually recruit.  What I am looking for is are tips on how best to set up and administer a recruitment program if anyone in this network has some ideas they`d like to share.  For example, one comment has been that recruitment for this type of thing is best in rural areas, as opposed to urban areas.

 

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Randy Kravitz
Managing Director
Juvenesse by Elaine Gayle
www.juvenesse.com

People sell to make money. MLM`s can be a very effective go to market strategy because when done right it solves two big problems:

1) You sell product.
2) You recruit more sales people.

It also eliminates the hard marketing and advertising costs required to sell products directly or through retail channels.

The problem with most MLMs is that consumers can buy similar or better products at local retailers, typically at lower prices.

Also, creating good jobs is in itself  a very socially responsible thing.

There are two prominent websites that can help you find independent sales reps.

One is RepHunter at http://www.rephunter.net  and the other is Replocate at http://www.replocate.com.  

The best of these is RepHunter because you can both post your sales opportunity and search their database of approximately 14,000 reps.

Best of all, RepHunter allows you to search their database before you subscribe and see profiles of all of the reps they have in your industry.

The RepLocate site will post your opportunity so that independent sales reps can find you. Your opportunity will also be emailed out to approximately 1500 opt-in sales reps.

RepHunter also provides training and they have an FAQ page located at http://www.rephunter.net/faq.php.

Both sites post their phone numbers, so you can get to a real person. And you will usually get to a person right away. The posted number for RepHunter is 612-486-5020; for Replocate the number is 651-438-3364.

 

Brenda - great post! I  have been on RepHunter  but had not heard of RepLocate.

Thanks!


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