Different Challenges at Different Stages
Numerous direct selling companies start their journeys at small offices, with a few staff – if any, and with very limited budgets. The ease of entry into the market attracts many entrepreneurs, naturally. At the end of the day, they would not need to invest heavily to build a huge manufacturing plant, would not need to hire hundreds of staff or to spend a lot of money on advertising.
Stage 1: Let’s Start
Usually, the first steps are determining the product line, deciding on the compensation plan and finalizing those legal / administrative issues such as putting together the application form, the representative contract, and the policies. If the local regulations require certification, that needs to be taken care of as well. That close friend’s son who happens to be a young graphic designer makes the website, and that nephew who has a programming certificate codes the software and voila! The company is in business!
Have I mentioned putting together a business plan with all the assumptions behind? Yes, some start ups do this, and I recommend this to all.
Entrepreneurs are generally the most worried about the field force those days. Would they be able to find and convince those “strong leaders”? Would the business start at a fast pace on the field?
Stage 2: We’re Doing Good
If everything goes well, the business grows and after a while the company starts making millions a month. Well, at this point, the company faces another set of challenges. This is the time when the entrepreneurial culture dominating the home office has to be balanced with a more professional “corporate” culture.
I am talking about internal policies and procedures, control mechanisms, a structured reporting infrastructure… all those that most probably have been ignored up until that time. Can the company still survive without having all these? Possibly… But at the cost of increasing the risks of a failure and also of a possible faster growth.
This is also the time to take another look at the headquarters (i.e. location, design, equipment, etc), corporate web site, presence on social media and definitely, the software being used. All of these might need serious improvements at this stage.
Stage 3: Time to Go International
And finally, for a company that has passed all these successfully, comes the time to go international. Should a company wait to see its success at the home country before going abroad? I would strongly recommend that. Expanding into other markets, before the operation is fully duplicable in another country, can make serious damages to the existing business.
Even if the operation is duplicable covering all aspects, this move is not challenge-free. First of all, a successful business will increasingly feel pressure from its sales force leaders for the company to expand into a country where they claim they have strong connections. While the existence of such ties is an asset, the company will need to make sure the information is true.
When a potential market is chosen, then will come due diligence. This is mostly in terms of making business in that country and of the regulations surrounding the direct selling in particular. So, yes ,you will have to have the staff knowledgeable enough to manage all these processes. Not only these, you also have to have professionals to monitor those international markets from your central location. These “new” people possess a very different set of knowledge and experience than what was needed during the earlier stages of the company.
Keeping the focus at this stage is also a challenge. When successful results start coming from few international markets one after the other, companies might choose the shift the gear and speed up. This is dangerous! Prioritizing and making prudent moves always help.
Many direct selling businesses pass through these stages in this order. And unfortunately, a number of these stumble badly along the way just because they are just not ready for the next step coming.
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Hakki Ozmorali is the Principal of WDS Consultancy, a consulting firm specialized in providing services to direct selling firms. He is also the publisher of The World of Direct Selling, global industry’s leading weekly online publication. He is an experienced professional with a strong background in direct sales. Hakki was the first corporate professional in the Turkish network marketing industry. His work experiences in direct selling include Country Manager roles at Oriflame, Herbalife and LR Health & Beauty Systems, and Regional Director, North America role at Lifestyles Global Networks.