How Much Does It Cost To Start A Direct Selling Company?

This is a good question to ask, but a difficult one to answer because there isn’t a single magic number to give you.

At Sylvina Consulting, we hear this question several times each week.  Everyone wants to know the magic number.

What would it cost you to build a house or to fill your closet with new clothes?  The answer is “it depends.”  It depends on your needs, what you buy, and how much you spend on each item.

Similarly, determining the cost of starting any type of direct selling company depends on the items in your budget. A budget is an itemization of estimated or intended expenditures for a given period of time.

Be careful if someone gives you a number (like $50K, $100K, $300K, or $1M) and tells you that’s all you need without examining your budget.  In my opinion, that’s malpractice.

I can tell you that our clients have launched their businesses for as little as $20,000 and as much as $2,000,000. To help narrow the cost, here are some questions to answer:

1. Have you written or are you writing a business plan? A business plan can help with the creation of a budget.
2. Does your business plan include a line item budget? You need to know the estimated costs of each expenditure to arrive at a total.
3. How much will you spend on your initial inventory? Generally speaking, this is frequently 25-35% of the total budget.
4. Will your first employees be paid or unpaid? Salary overhead can be small or large as a percentage of your budget.
5. Do you know your margin multiplier? This is one of the variables that affect the length of time required before your business will be profitable and cash-flow positive.

The more you know about your business, the better your estimate. Information about your specific business is absolutely required to determine the amount of money needed to start your business.

While some businesses begin without a business plan, we believe that writing a business plan is important. Research has determined that people who write business plans also do other important planning tasks.

You can start simply with word processing and spreadsheet programs, or purchase software like Business Plan Pro.

Writing a business plan may help you to look at all the pieces and the entire picture. It should give you a detailed analysis of what needs to be done and how much it will cost.

Your local Small Business Association (SBA) office may have business plan examples and other information to help you to move forward.

Business plan books and software can help you with the important basics of all business plans, but they don’t tackle the unique aspects of home party plan or network marketing businesses.

Sylvina Consulting’s insightful book, Start Here: The Guide to Building and Growing Your Direct Selling Company includes a complete chapter on business plans.

Now available in English and Spanish.

If you haven’t launched a direct selling company previously, remember to get professional help in reviewing or amending your business plan and budget. Otherwise, you may find out at an inopportune time that your business plan or budget may be insufficient.

Sylvina Consulting can help you with your business plan and/or budget. If you have questions or need help, please feel free to contact me at 503.244.8787 or email me at jay@sylvina.com