Financial Modeling for Direct Sales: The Answer For How to Be Prepared

Nov 22, 2018Sheffield Blog

In any type of business, financial modeling is a critical component for success, but all too often, the process of revenue modeling is overlooked by those in direct sales. The truth is that having a revenue model in direct sales can not only help you earn additional income, but it can also keep you and your team productive without feeling overwhelmed.

Where to Begin With Financial Modeling

Most profitable direct sales companies start creating a financial model by looking at revenue assumptions from a bottom-up perspective. This is to say that they first examine how they want to increase market share. This market share is the share of any market in which the sales are being made, so it could be local, regional or national. The point is to compare what share of your target market you already have against what share you want to obtain. From there, start thinking about how you’re going to increase share of the market you have chosen.

Revenue assumptions in the direct sales model are things like what products you sell, how they are sold and the costs associated with delivering products to the customer. In most cases, the direct selling model assumes that you are working with customers face-to-face, your inventory is based on your current volume of sales and the costs of delivering your products are based on the size of your team and location.

Essentials of a Good Financial Model

Your sales assumptions are also important when creating a good financial model. Sales assumptions are things like your conversion rates, your sales funnels and sales cycles. Your sales cycle comes down to how long it takes to get new team members recruited and up and running as well as how long it takes for a team member to begin closing sales. When thinking about how to make a financial model, this aspect of the process can be dependent upon the types of products you and your team sell. Some products require a more intensive funneling process to convert a lead, especially when these products serve niche markets through direct sales.

Once you have your revenue and sales assumptions in place, you need to start considering growth of the business and additional revenue streams. These points can be scaled each time you work through the process of creating a financial model based on how large you want your business to be within the market. Everything from adding team members to the addition of new or upgraded product lines should be factored in when it comes to growth.

Finally, you will want to take into account marketing your business and the associated growth and costs that come along with marketing. Some direct sales professionals choose to branch out and sell their products and recruit team members online, so costs for things like search engine marketing, website hosting and ecommerce solutions need to be factored into overall costs. Once again, think about how you will grow the business by comparing your current costs versus the costs associated with your marketing as the business grows and gains additional market share.

Where to Find Sound Consulting

Your financial model can be as detailed as you would like, but as you get more detailed, you may find that you need some help in keeping up with all of the moving parts of your business. In such cases, it would be a good idea to partner with a direct sales consulting professional at The Sheffield Group.

The direct sales experts at The Sheffield Group can provide you with financial modelling tips, but they can also help you work through all of the complex details that pertain to your unique direct sales business, products and team member considerations. Learn more by calling (877) 232-3259, or click here now to schedule a consultation.