Aug 23, 2006

Math Lesson for the Day: Cost of ScrapBiz vs Cost of Direct Sales Company

Occasionally, I see messages around criticizing the cost of ScrapBiz. Some will say, "Why should I join ScrapBiz and pay them $79 for the book and $12 a month forever when I can join a Direct Sales Company for $40?

You may not THINK there is an ongoing cost as a DS consultant, but there certainly is. You just don't pay that cost directly as you would with ScrapBiz, instead, you just don't get it in your "take-home pay".

The charts above show the difference - and it's quite shocking, really. Here's the scenario:

Assume you sell $300 in one month as a direct sales consultant and that you get to keep 20% of your SALES. Let's assume this company doesn't make their own exclusive products and has to purchase them from elsewhere at the wholesale price, which is generally HALF of retail. That money belongs to someone else (whoever sold them the products) so we'll take it out of play right away. We're mainly concerned with the Purple and Green half of the chart.

So, you sell $300 and get $60 for your efforts (20% of $300). Assuming there was $150 in GROSS profit to share, the company keeps the other $90 of that profit.
So, the cost of you belonging to that direct sales company for THAT ONE MONTH is $90.

Look at the next pie chart. This assumes you are a ScrapBiz member and you purchase the products yourself from one of our wholesale partners. Again, ignore the Yellow half of the chart - that money is paid to the vendor. Out of the remaining $150 in profit, you keep $140 and pay ScrapBiz $12 for the monthly access to our support network and information.
That's almost 2 1/2 times MORE MONEY in your pocket!!!!

Now, you might immediately say, "Yes, but my company provides hostess benefits, a cheap website and credit card processing". Does the monthly value of all that even get CLOSE to $80????? (Or, about $1,000 annually). Websites and CC processing are ultra-cheap these days and your hostess gift is purchased at the WHOLESALE price. The point is that you have $80 more dollars to play with! Even if you bought $20 in hostess gifts and prizes, you'd still be taking home DOUBLE the amount.

BOTTOM LINE: The annual "cost" (in this scenario) of belonging to a Direct Sales Company is $1080 if you are selling only $300 in products each month (if you sell double that, then the "cost" doubles, too). The cost of being a ScrapBiz member and getting all the benefits that come with it is $140 annually no matter how much you sell.

Now, tell me again how it's cheaper to join a direct sales company???


Anonymous said...

Another interesting perspective on something. Thanks!

Anonymous said...

Wow - I had never thought that it cost me money to be a consultant.