The 10 Most Common Mistakes in Direct Selling Part 4
by Dan Jensen
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#7: Computer Software That Doesn’t Work
In the section on training, I addressed the need to have good “systems” that, if followed, comprise the methods to handle each type of business transaction, whether the transaction is a sales order, a phone inquiry, a complaint, or the return of product for a refund. Computer systems in direct selling companies become the glue that binds the office departments together, a “core” around which the business is built. No successful direct selling company has ever sustained their success without a well-designed computer system behind it. A well designed software system builds bristling barriers to competition. Likewise, there are many direct selling companies that have failed due primarily to the lack of a good computer system. Don’t let your new venture become just another statistic. Choose your software supplier wisely.
What does a good direct selling software system do?
The software determines how you run your business. If the software can’t do it, your business can’t do it. The equipment that runs the software is of little importance in comparison. At a minimum, your software must do the following:
- Manage your genealogy or downline structure
- Calculate commissions with perfect accuracy
- Calculate incentive awards such as trips, recognition prizes, etc.
- Distributor order processing
- Party plan order processing (if party plan)
- Order fulfillment and shipping
- Monthly automatic order shipments (if required)
- Customer service support
- Accounting (general ledger, payroll, etc.)
- Product returns and exchanges
- Inventory control
- Credit card processing
- Electronic commission deposit processing
- Distributor web access
- Sales tax processing (in the USA only)
- International currency (if more than one country is planned)
Your procedures and policies will have to conform exactly to your software or you will be forced to change the software, sometimes at considerable expense. This is one reason it’s so important to wisely choose the software you use.
One of the greatest mistakes companies can make in this area is to think they can save money by writing their own software. Not only does this take years to do, but it can never reflect the experience and know-how that packaged direct selling software contains. Why reinvent the wheel? Would it be worth the risk of losing the
business to poorly designed software resulting in incorrect commission checks, errors in tracking a person’s downline records, lost orders, and so forth? Those companies that elect to write their own direct selling software often find later on that it cost much more than it would have cost had they purchased it “off the shelf”. They often find that they are vulnerable to the programmer who wrote it. What if he moved away or became injured or sick? What if he took another job at a higher wage? Never let someone convince you they can program a direct selling software system in weeks or months. It’s never been done successfully before. Why should you believe it could be done now?
Software companies that specialize in direct selling have spent many years writing their software so that it works right the first time, every time, and they offer it to the public for a small fraction of what it cost them to create it. It’s the best money you’ll ever spend. They also provide a support team to make sure you send out your commission checks on time, every time.
How do I choose a good direct selling software package?
While this article does not have the space to address this subject fully, a few suggestions should be noted:
Choose a reputable vendor. There are many fly-by-night software companies that make many claims of experience, know how, and software gadgetry. Don’t be taken in by “eye candy” – software that looks good on the surface but has little substance behind it. Unless you are willing to be a guinea pig (and put your business at risk), choose a vendor that has a proven track record. Track records are built over many years of working with direct selling companies, not just selling a software package a few times. Indeed, having only a small handful of clients may speak more about a software company’s persuasive abilities than their actual know how and skill. Above all, check out at least six references. Remember that vendors will be eager to provide only their best references. Be sure some of the references are relatively recent. Always get the names of other companies from these first references that you might call. You might be surprised to find a different story when you call companies not included in the first reference list.
Visit the software company’s office. When you choose a direct selling software package, you not only choose the software, you also choose the vendor’s support team. It’s a marriage, of sorts. If the vendor is not able to provide support services acceptably, what will you do when you need to change your compensation plan or add a new input field to the order entry screen? There is only one constant among all direct selling companies – they constantly change things! And your software will need to be changed as well.
While at the vendor’s office, meet the vendor’s people that will service you. What kind of people are they? How long have they worked for the vendor? If you find they are relatively new, either the vendor has little experience, is growing too rapidly (in which case you may have trouble competing with other clients for good service), or has high staff turnover. All these can mean trouble for you as the vendor may not be able to handle your needs quickly and competently. Be willing to pay for experience and competence. You’ll pay far less in the long run. If you think knowledge is expensive, try ignorance!
Avoid very small software companies with a small handful of employees. Small software companies, to compete with larger and more established firms, must offer software at bargain prices. This often puts them on shaky financial ground during their most critical years. Many direct selling companies, trying to save money by purchasing software from these small software houses, find themselves virtually abandoned later on when they need assistance. The problem is that servicing one highly successful client can consume almost all of the human resources of a small software company leaving the other clients out in the cold. It can take months (or years) to train competent software technicians on a direct selling software package. The more deadly problem, however, is that smaller companies tend to go out of business without warning. The direct selling industry is especially brutal on small software companies and has seen many software firms close their doors leaving their clients high and dry. If you value your business, stay away from the small vendors and stick to those with staying power and track records.
Buy a software package that allows you to create your own reports. Many packages force you to live only with those reports they put on the menus. There is a wealth of information inside your computer database, but with some software systems you can’t get it out. It’s like having money in your bank that you can’t withdraw!
Make sure the company can program your compensation plan. Compensation plans are complex and take massive amounts of experience to program properly. When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one you can find? Compensation plan programming is not something inexperienced programmers can be trusted to do.
Do you plan to expand internationally someday? If so, choose a software package that incorporates international issues such as multiple currencies, language translation, cross border sponsoring, V.A.T. tax reporting, and foreign address formats. Is the software also available in other languages so your foreign speaking staff and sales force will not all need to speak English to use it? If you invest in a software system that does not handle international currencies, the cost to change it will usually far exceed the cost of the software itself or necessitate replacing it with a completely new system.
Buy software that can handle high growth environments. While personal computers can work for starting a new company, they are not cut out for larger successful direct selling operations. Most large direct selling companies use large UNIX based minicomputers with several hundred PC workstations networked together. Most software that runs on a PC cannot be run on UNIX minicomputers. In either case, if you expect to be successful, don’t limit yourself by choosing software that only runs on PC computers. Some software providers will rent you space on their powerful servers. This may be far less expensive than investing in your own equipment and can work quite effectively in the crucial startup phase when funds are tight. Many well established companies prefer this approach, too.
Compare features. Software is designed to handle specific business issues and often has a great deal of difficulty dealing with matters outside the original design. It’s difficult to force a software package to do things it was never intended to do. For example, a software package not designed to handle multiple currencies or cross-border sponsoring may prohibit a company from expanding internationally. Wise computer buyers compare features and capabilities, side by side, of one package to another. Ask the vendor which features they consider are unique to their package compared to others. Like a car missing its engine, a software package that is missing an important piece is not a bargain at any price. As you compare software, use the features list of the one that has the most to offer and compare the features of the other packages to it, feature by feature. You’ll be quite surprised as to how many “holes” the other packages might have.
Remember that you aren’t just buying a computer; you are buying software, expertise of a support team, emergency support services (24 x 7, hopefully), programming services and a long-term relationship. Choose your software vendor wisely. Of all the aspects of a start up direct selling business, don’t be tempted to penny pinch in the computer area. If you do, you may cripple your chances for success.