Time and again young leaders and new consultants approach me with questions regarding re-investing in their business. Simply put, a savvy consultant does need to set aside a certain amount of profit to reinvest for business growth. The challenge comes, however, when consultants are earning so little in the first place, that they just don’t think it’s possible. The profit margin is either too slim, or they’ve already spent it on living expenses.

It’s a dirty little secret that most consultants don’t want to talk about or admit…

Direct sales companies attract consultants with great income potential, which leaves many consultants seeing dollar signs. It’s not the fault of the companies – far from it. Commmission and compensation rates are very clearly outlined on every consultant agreement and policy manual. What’s missing, however, is any training on financial management or fiscal responsibility.

Again, this isn’t the problem of the direct sales company. It’s not even part of the “jurisdiction” of a direct sales company. Financial management is the responsibility of the consultant, and yet, too few leaders are offering any training to help their organizations make sound business decisions with their earnings.

Here are a few simple considerations to help you make re-investment in your direct sales business a little easier:

1. Split your profits on a percentage basis. Even if you’re not making a ton of profits each month, if you allocate specific portions of your income for different purposes (debt reduction, savings, team recognition, supply replenishment, etc), it becomes easier to stay consistent in reinvesting appropriately. It’s hard to set aside $20 from every show when you have that “bomb show” that only has $100 in sales. Opt instead to set aside a specific percentage of each profit check to make things easier.
2. You don’t need every new-fangled seasonal product. When you’re strapped for cash, one of the worst things you can do is plow more money into seasonal merchandise that has a short sales “life span”. You don’t need to purchase every new product that’s coming out in the holiday catalog, just to have it on hand for clients or team members that can’t afford to buy it for themselves. Buy what you will use – or what you don’t mind having around at the end of the season if and when it doesn’t sell.
3. Curb “consultant cost” purchases. Most consultant offers do not give you sales credit or commissionable credit. These are often advance purchases or end-of-season clearance items that companies offer to you at a special price. Unless you can turn around and sell the product, or you know your clients will go crazy for it (in the case of advanced purchases), it makes more sense to wait it out until you can buy it on a regular show order.
4. Double (or triple) dip when possible. If your company allows, add your purchases to an existing show order, take advantage of unclaimed host credits, and still get sales credits for the replenishment orders you’re placing. Not every company allows this kind of thing, but if your company does, take full advantage of it. You’ll be reducing your costs to re-stock your kit, plus many companies offer bonuses based on sales levels. It makes sense to let your own purchase count toward those levels whenever possible. Additional host bonus items can later be used as booking incentives or other gifts – generally at no additional cost to you.
5. Track your deductions. Tax time rolls around once a year, but keeping track of the money you spend should be a regular occurrence. Mileage, inventory, a business cell phone and other expenses can add up during the year yielding a substantial deduction come tax season. Talk with your tax preparer or book keeper for additional information.

Direct sales professionals serious about running a profitable business scrutinize every expense and look for a solid return on their investment. If you want to make the most of every dollar you earn, you owe it to yourself to look closely at every penny you’re spending in your direct sales business.

© 2010 Lisa Robbin Young.

If you need additional help navigating cash flow and building a strong financial foundation in your direct sales business, consider Direct Sales 102. Designed for direct sales pros, Direct Sales 102 shows you how to build a financial foundation for success.

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Lisa Robbin Young offers direct sales coaching and training to direct sales professionals looking to grow their business like a real business instead of an expensive hobby. Sign up for her free weekly ezine at https://www.homepartysolution.com.