What do you do when your direct sales company closes or changes?
We like to think that the company we joined – the one that we were so passionate about – will be around forever, but that's not always the case.
2020 has been a tough year, and some companies simply couldn't make the online pivot fast enough to stay afloat through the Covid pandemic. And this has resulted in many companies changing business models, being sold or acquired, or closing outright.
Every year many companies change, close, or are acquired leaving thousands of independent consultants uncertain of their future. And when we've invested so much into our businesses, teams, and social communities, it is completely normal to feel shocked and angry that someone else is making decisions that affect our financial livelihood.
Some of this is the nature of direct sales… consultants and leaders don't necessarily have insight into the company finances or decision making, and are therefore unprepared if a major announcement happens. So let's be prepared to take quick action if your company does announce a major change that will directly affect your ability to sell, sponsor, or lead your team effectively, and earn your consistent personal or team commissions or income.
What do you do when your direct sales company closes or changes?
The first step to figuring out your next steps is to look at what's happening with the direct sales company. What change(s) is your direct sales company going through or proposing?
Once you know how the company is changing and what those changes entail, you can start looking at how that change will impact you and what you can do when your direct sales company closes or changes.
What changes might your company be undergoing?
Change in Business Model
Direct sales, party plan, or multi level marketing companies have financial structures built to support the commission they pay to leaders. If expense overhead or cash flow are unsustainable, following are three different types of changes to a business model a company might employ:
- Going ‘consumer direct' or ‘retail direct' meaning, selling in an e-commerce model direct to the end customer without the consultant in the middle. This may be done to eliminate the consultant overhead costs, or change their advertising strategy. This is basically the equivalent of “firing the consultants” and the company sells directly to your customers. You will be left feeling emotionally gutted. How could the company do this to you? You're the ones who built the company! It's your customers who have sustained them. And now they're going direct? See below for all the considerations if your direct sales company closes outright.
- Flattening the compensation structure to focus more on sales and less on the deep structures of paying sponsoring or team-based commissions. This helps eliminate expense out of the company's business model, and shift focus toward leveraging the consultant field as sales representatives. This often coincides with an increase in personal sales commission.
- Shifting from a multi-level marketing model, to an affiliate-only model. Affiliate-only is typically single tiered, and eliminates the team or leadership expense associated with paying for team overrides, while still compensating the consultant for selling the product to customers. An affiliate model opens up a lot of new marketing possibilities to a consultant, as sales become primarily focused on customer sales, leveraging a variety of sales channels, independent branding, and expanding into multiple affiliate relationships. This is a good option for a seller who wants to brand themselves independently, and has a strong social monetization strategy.
Company Sale or Acquisition
A company sale is often a shock to a consultant field as they're merged with a new and unfamiliar brand. Considerations to watch out for here include:
- Will the acquiring company be maintaining the acquired company name, branding, and products? Or merging them into the new company name, brand and assets?
- Will team structures be rolled into the new company as-is?
- Will leaders have to rebuild their teams in the new organization? Will consultants have an opportunity to change leaders in the transition?
- Is anything being publicly communicated to customers or social followers?
- Will there be changes in compensation plans?
- Will consultants from acquired company be able (or expected) to sell from the acquiring company's catalog?
- What training will be provided to consultants from the acquired company on navigating the transition?
Company acquisitions are typically financially driven and are the stickiest of all. There are a lot of unknowns, and everyone is jockeying for position, trying to retain their teams and structures, and quell the fears of their customer and public communities, while maintaining some level of income.
My best suggestion is to pay close attention to corporate announcements, and executive leadership communications. Be active in asking for what you want and need for your team and customers, and be prepared to evaluate if or when it is time to leave if the acquiring company no longer aligns with your business goals or values.
The company closure announcement is the most disheartening of all. Whether it's a sudden and shocking announcement, or an announcement with a future end date, consultants and leaders will naturally grieve the loss of the company they had emotionally and financially invested in. This could include loss of income, teams, and future plans – along with being left holding hundreds or thousands of dollars in unsold inventory.
Following are some tips on navigating your company's closure:
- Take time to grieve. It is natural to experience feelings of loss. Talk to your team, customers, and friends about it. Share in the good memories.
- Evaluate your goals. Do you want to stay in direct sales and try to keep your team intact? Would moving quickly to a new company help ease the transition for both your team and customers? Consider companies in the same business space that would be a natural transition for your customers and team. Checkout these 61 questions to consider when choosing a new direct sales company or sponsor, before making any major leaps. (Definitely try to explore the new company's financial stability, so you don't end up in another closure situation.)
- Block all the spammers and poachers. When a company closure in announced, the spammers inevitably come out and try to quickly capitalize on your loss. They are only in it for themselves. As mentioned, take the time to grieve and research the right new company and sponsor for you, that aligns with your goals.
- Create a closed group and sell any remaining inventory you have on-hand. If your company has closed and you're no longer under compliance restrictions, sell at whatever price will help you recoup your cost or investment, plus profit.
- Create new cashflow. If your direct sales job was a substantial or primary part of your income, you will need to replace that quickly and this will become your biggest source of anxiety. If you were a leader, you likely have a lot of digital assets that would have value for other leaders. Consider selling those digital assets on a site like Direct Creatives, which is geared specifically for direct sellers. Or, evaluate what income-producing options you have to monetize your knowledge and talents. Is this the time to start an independent boutique? Coaching business?
Any changes to your direct sales company are going to be difficult. Luck favors the prepared. Understand your options, and you will be able to quickly land on your feet – wiser in the knowledge to always diversify your risk, and not keep all your financial eggs in someone else's basket.