The eight myths of direct selling: looking for the big payoffs of being on your own? Well, before you jump in, here's what you really need to know about the direct sales business - includes tips from the Direct Selling Education Foundation

Black Enterprise, Dec, 1993 by Jean Marie Angelo

Do you want a job offering unlimited earnings potential and the ability to be your own boss? Scores of direct sales companies, from Amway Corp. to Primerica Financial Services to the lesser-known Artistic Impressions Inc., recruit countless Americans every day with just this dream of affluence and financial independence.

We hear stories of fortunes, free travel and independence, along with suspicions of rip-off schemes and wasted money. What's the truth?

You can't really tell from the pot-of-gold stories gracing the promotional pieces produced by these companies. Witness ShakleeVision, a national satellite broadcast program highlighting the benefits of joining Shaklee Corp., a San Francisco company selling vitamins, household cleaners and personal products.

In the pilot program, Jane Short, an African-American sales leader from Pomfret, Md., and 19-year sales veteran, calls herself one of the company's "old-timers." "When I was out there, relatively new to Shaklee, I would listen to these talks and say, 'This can't be true, it can't be that good.' Well forget it. It is even better."

She drives a Mercury Marquis LS, the Shaklee bonus car, one of seven she has earned over the years. She and her family have traveled the world, thanks to bonus trips provided by Shaklee. She sent her children to college--with ease. There is no doubt that she is sincere. But will direct selling do the same for you?

Much depends on your ambition and ability to discard the hype and find a genuine business opportunity. The details of each company's sales plan may differ, but generally all offer products through sales representatives who sign on as independent contractors. In turn, they sell via personal appointments or parties. Some sales representatives do earn tidy incomes. However, most use direct selling as a part-time supplement to their regular income. And, on average, blacks do better than whites. According to the Direct Selling Association in Washington, D.C. (DSA), the weekly median direct-sales income for African-Americans is $82, versus $50 for whites.

HOW TO SPOT A RAW DEAL

The Direct Selling Education Foundation, Washington, D.C., issues some guidelines. They advise that you beware of:

* Intense pressure to sign up or buy large amounts of inventory before sales claims can be investigated or legal advice obtained.

* Promises of extraordinarily high or guaranteed profits.

* Claims that profits can be achieved easily.

* A required initial fee which greatly exceeds the fair market value of any products, kits or training.

* A large fee payable before you receive anything in return.

* Evasive answers by the salesperson, or an unwillingness to give disclosure documents required by law.

A booming business, direct selling accounted for $14.1 billion in sales in 1992, up 45% from 1988, according to the DSA.

Essentially, these companies offer consumers the convenience of shopping at home. However, unlike catalogs or shop-at-home television channels, direct-sales companies encourage consumers to see and feel what they are buying.

There are many myths--positive and negative--about direct-sales marketing. Separating the perception from the reality can help improve your chances for real success.

1. All direct marketing companies peddle rip-off schemes.

Some do and some don't. There is a difference between pyramid schemes and multilevel marketing (MLM) plans. MLM's are perfectly legal business opportunities that not only pay incentives for you to sell a product, but also pay additional bonus compensation, or overrides, if you recruit others to sell.

Mary Kay Cosmetics, Shaklee Products, Primerica Financial Services and scores of other direct-marketing companies rely on MLM plans. The commission you make for selling products varies from company to company. It can start at 10% and go to 30%, 35% or even 50%, depending on the amount of volume you move. Your override may start at 4% and increase, depending on how many people you have in your "downline" (your team of recruits) and how much volume they produce. Most companies also require you to continue to sell to qualify for overrides.

Pyramids, on the other hand, are illegal schemes. Many times they are disguised as MLMs, but selling the product is not nearly as important as getting a downline. New distributors might be required to pay a high sum of

money to join or to purchase a large amount of initial inventory. Some money goes to the person who found the new recruit and the rest goes to the company.

For pyramid schemes to work, there must be an endless supply of new distributors willing to part with their cash. And this is exactly why they fail: There is never an endless supply. Those who make money sit comfortably at the top of the pyramid.

Good research is the only way to determine if a direct-sales company is a legitimate MLM or an illegal pyramid scheme. Find out where the company is headquartered and ask the local Better Business Bureau for its file on the company. Call the state attorney general's office for reports on current or past investigations.