Direct Access, Inc., business plan proposal
This business proposal, written and presented to Barry Diller, introduced him to multi-level marketing and anticipated his every question.

Business plan proposal
Direct Access, Inc.

Table of Contents

  • Executive
    Overview, 1
  • Mature Sales
  • Quality Products
  • Large Target Market
  • Healthy Profitability
  • Summary

  • Business
    Description, 5
  • Background
  • What is MLM?
  • How Does It Work?
  • Why MLM Is Not a
    “Pyramid Scheme”
  • Product Line
    Description, 11
  • Quality Assurance
  • Core Categories
  • – Nutrition
  • – Personal Care
  • – Cosmetics
  • – Household

  • Product Ordering
    Process, 16

  • Marketing Advantages
    /Issues, 17
  • Marketing Advantages
  • – Name Recognition
  • – Infrastructure
    and Fulfillment
  • – Product Flow
  • – Distribution Network
  • – Marketing Issues
  • Building
    Direct Access, 20
  • High-level Recruiting
  • Recruiting at Home

Training, 24

Plan, 26

Glossary of Terms, 27

  • Management Team/
    Organization Chart, 31

Assumptions, 35


Financial Projections

Executive Overview

Direct International, Inc. seeks to develop an alternative sales channel based on a mature, proven-successful sales and distribution strategy known as multi-level marketing (MLM). Initial planning began in October 1996 to enter this market and launch “Direct Access.”

Multi-level marketing is a system of selling and distributing reasonably priced products directly to consumers. An MLM organization expands by encouraging customers to become affiliated with the company as entry-level, commissioned sales representatives. These sales representatives then have the opportunity to sponsor other representatives, eventually building a group with virtually unlimited potential.

“...I am attracted to (network marketing direct sales) businesses such as Amway and Mary Kay. For little or nothing down, you can be in business around the world–if you’re willing to persevere and work harder than the competition.”

—Newt Gingrich, U.S. Congress, Speaker of the House

The MLM sales channel grows exponentially. In one organizational model, for example, a sponsor will recruit three sales representatives (3 persons), who become sponsors of three more people (9 persons), who become sponsors of three more people (27 persons), and so forth.

At a higher level than sponsor, a trainer benefits by receiving payouts based on his or her group’s sales.

Mature Sales Methodology

Sales representatives typically will know their customers as family, friends, neighbors, co-workers and other acquaintances.

As a result of these existing personal relationships, multi-level marketing companies that sell quality products tend to enjoy high customer loyalty, a high level of trust and virtually no product returns.

Multi-level marketing is a $100 billion international industry. Thousands of manufacturers use the MLM methodology, in addition to their other sales channels. By eliminating the chain of middlemen, a manufacturer saves significant costs, up to 80 percent of the retail price.

Among the companies that sell directly to consumers through MLM: Coca-Cola, Kellogg’s, Toshiba, Seiko, Westinghouse and, of course, Amway, Mary Kay and Avon.

In the giant household and personal products industry, five of the top 20 retail sales leaders for 1995 were MLMs. Publicly-traded MLM companies outperformed the Dow Jones average and Standard & Poor’s 500 by more than 70 percent in 1995.

Amway’s sales of $6.8 billion in the fiscal year ended 8/31/96 represents an 8 percent increase over the previous year. Approximately 70 percent of those sales were outside the United States. Amway’s 2.5 million independent distributors sell some 1,200 products in 75 countries and territories (Forbes, Jan. 13, 1997, p. S-56).

Our fulfillment operation handles in-bound telephone sales for Amway in the United States. Thousands of lesser-known companies are also reaping the rewards of MLMs. For example, family-owned New Vision International, Tempe, Arizona, grew within six months of start-up in March 1995 to sell its Essential Minerals liquid at the rate of $500,000 a month. Sales doubled to $1 million a month just 60 days later and totaled $350 million in 24 months (Success Magazine, Nov. 1996, p. 20)

Quality Products

Customer satisfaction is key to the success of a multi-level marketing program. By offering quality products that measurably improve customers’ lives, Direct Access will build long-lasting relationships.

Direct Access intends to use Direct International’s existing, proven expertise to select and acquire products. The company’s product philosophy favors breakthrough, consumable products that demonstrate well and deliver measurable results at prices comparable to retail. Initially, Direct Access intends to sell products in four core categories: nutrition, personal care, cosmetics and household, with an outer circle of satellite product categories, such as pet care, fitness, sporting goods, automotive and water purification.

Large Target Market

In the multi-level marketing industry, virtually “anyone” can be a distributor. “Ninety-six percent of adults 25–44 are ‘very interested’ in owning their own business” (USA Today). Direct Access’ primary target for entry-level sales representatives includes men and women over the age of 18 who have the motivation to sell. For as little as $29.95, they can become a distributor. That’s a very large universe of prospects by any marketing standard.

“Ninety-six percent of adults 25–44 are ‘very interested’ in owning their own business”
USA Today

Ideally, Direct Access sales representatives will be self-starters, entrepreneurial and upwardly mobile. Earnings are directly tied to a sales representative’s level of enthusiasm and productivity.

To join the company, a starter kit costs $29.95. We also require each sales representative to buy (to use or sell) a personal volume of our products worth $100. This is a very low start-up cost in the business franchise industry, compared to buying a McDonald’s or other franchise, which cost hundreds of thousands of dollars.

Training is another key factor in the success of a multi-level marketing organization. Direct Access has recruited the services of expert MLM strategists who are nationally recognized for their ability to build an effective sales force that yields dramatic results.

Research demonstrates the vast success of multi-level marketing outside the United States; in the future, Direct Access also seeks to expand throughout the world.

Healthy Profitability

Direct Access’ profit projections take into account the cost of products, distribution, fulfillment and overhead. Even allowing for fivefold uplift and a 43 percent margin, pricing will be comparable to retail. Direct Access will be properly capitalized and backed by the combined multi-national sales and formidable global dominance of [names] and Direct International.

Furthermore, the company will enjoy synergies in name recognition, product purchasing and infrastructure, plus economies that well-position it for momentuous growth in just two years. Direct Access intends to take advantage of our smooth-running call center and pick, pack and ship operation, which support U.S. domestic and international business around the clock (24/7/365). Added value includes the company’s commitment to high quality products; an unlimited, no-questions-asked return policy and “The customer is always right” service philosophy.


MLM is one of the fastest-growing sales channels in the world. The MLM industry grosses over $18 billion annually in the United States alone, according to the Direct Selling Association. Industry experts predict its sales will reach $100 billion in the year 2000.

Direct Access enjoys many advantages in this arena which position the company for immediate and rapid, exponential growth.

The company seeks to launch Direct Access in the United States, in Spring 1997. We project earnings before interest and taxes of $658,801 and 9.83 percent profit in the launch year; $4,870,328 and 17.62 percent profit in the second year; and $20,570,648 and 23.72 percent profit in the third year. Following is a comprehensive business plan with detailed financial data. Additionally, management is pleased to conduct a tour of its facilities.

Business Description

Background Direct Access seeks to develop an alternative sales channel that is based on the earliest form of marketing: person-to-person selling. The company’s mission is to sell products directly to consumers through a multi-level marketing (MLM) organization.

Direct Access will benefit from the vast experience of (subsidiaries and infrastructure), one of the most efficient direct marketing and order processing operations in the United States.

“Nobody wants to go to stores anymore. And network marketing direct sales has the solution.”
— Faith Popcorn. author of The Popcorn Report

Today, “home-based retailing” caters to a growing number of individuals who place emphasis on family activities in the home. In her book, The Popcorn Report, author Faith Popcorn describes this trend as “cocooning.” Technology has allowed telecommuters to work at home. Also, with corporate downsizing, more people are changing their occupations and working (or looking for work) from their homes. Technology has played an additional, major role in home-based retailing. Electronic transaction processing enables everyone with a telephone to place orders via the keypad.

Home-based retailing provides a part time or full time opportunity for men and women, an alternate source of income. In fact, in 1995, some 50 million people were home-based retailers. MLMs account for more than $18 billion in sales in the United States and $115 billion in sales worldwide, according to the Direct Selling Association.

Industry experts predict MLM sales in the United States will reach $100 billion by the year 2000. Multi-level marketing is the #1 competitor to major retailers and the system is taught as a distribution strategy at Harvard Business School.

Another trend is the success of new media in the direct response home-based retail marketplace, such as infomercials, catalogs and–looming on the horizon–the Internet.

However, the fastest-growing sales channel is the multi-level marketing organization, according to industry analysts. It’s a phenomenon that appeals to American entrepreneurs for both business and personal reasons.

In fact, in the international household and personal products industry, five of the top 20 retail sales leaders for 1995 were MLMs. Direct Access enjoys a head-start in this marketplace; the company has major competitive advantages even over existing MLMs.

In an April 1996 article, Business StartUps magazine wrote: “(Among the) 100 Best Businesses to Start–network marketing. Average start up cost: $100. Average net profit before taxes: $40,000 per year.”

Better yet, “Literally thousands of people are realizing annual incomes in network marketing in excess of $100,000” (Entrepreneur, September 1995).

What Is MLM?

Multi-level marketing is a system of selling and distributing products in an organization that expands by encouraging customers to join as sales representatives. Whereas conventional marketing systems distribute manufacturers’ products, MLM organizations combine two proven-effective techniques: face-to-face selling and relationship marketing. Sales representatives typically will know their customers as neighbors, co-workers, fellow club members, little league parents and friends of friends.

The Power of Person-to-Person Selling (in billions of dollars)

In the international household and personal products industry, multi-level marketing organizations represent five of the top 20 retail sales leaders for 1995 (Source: Direct Selling Association)

  • 1. Proctor & Gamble
  • 2. Colgate-Palmolive
  • 3. C. Johnson & Son
  • 4. Amway
  • 5. Avon Products
  • 6. Esteée Lauder
  • 7. Revlon
  • 8. Sara Lee
  • 9. Dial
  • 10. Bristol-Myers Squibb
  • $ 26.4
  • 6.45
  • 3.7
  • 2.65
  • 2.6
  • 2.5
  • 1.73
  • 1.53
  • 1.51
  • 1.29
  • 11. Helene Curtis
  • 12. Alberto Culver
  • 13. Ecolab
  • 14. Clorox
  • 15. Gillette
  • 16. Johnson & Johnson
  • 17. Mary Kay Cosmetics
  • 18. Bausch & Lomb
  • 19. Nu Skin International
  • 20. NCH
  • $ 1.27
  • 1.21
  • 1.20
  • 1.18
  • 1.16
  • 1.00
  • .850
  • .663
  • .500
  • .456

As sponsors enlist new sales representatives, the network grows geometrically. In a textbook MLM model, one sponsor will recruit three sales representatives (3 persons), who will become sponsors of three more people (9 persons), who will become sponsors of three more people (27 persons), and so forth.

MLMs build revenue while giving individual sales representatives the opportunity to earn commissions based on his or her own enthusiasm and productivity. In effect, each sales representative is the CEO of his or her own enterprise.

The MLM industry’s growth has surpassed typical models of marketing success. Normally, it takes about five years for a corporation to progress from being a fad to a trend, on its way to becoming a force. MLM industry corporations have demonstrated rapid success, achieving momentous growth in only three years. Direct Access will enjoy name recognition, product synergy, a world-class infrastructure and other competitive advantages that will help drive the company to momentous growth, projected to begin in two years or less.

How Does It Work?

In the Direct Access plan, management expects each sponsor to recruit three sales representatives. Direct Access’ corporate philosophy is to offer individuals the opportunity to achieve financial freedom in a home-based business through multi-level marketing. The company will emphasize training; with higher level individuals training the others down the line. The sales process begins when a Direct Access sales representative contacts a family member, friend or acquaintance and suggests that they meet. The sales representative has two objectives in meeting with prospects: to sell products and to present Direct Access as a business opportunity. Selling products brings in revenue for the representative.

Why MLM Is Not a “Pyramid Scheme”

Multi-level marketing is a legitimate, mature sales channel and system of distribution in use by thousands of manufacturers in the United States and worldwide.

The U.S. Federal Trade Commission considers a “pyramid scheme” to be an illegal organization that sells no tangible products or services. To use an analogy, one could say that a robber acquires goods without having money; a pyramid scheme acquires money without having goods.

The Direct Access model derives 100 percent of its revenue from product sales. Distributors earn commissions for product sales only. This clearly demonstrates compliance.

Direct Access consults regularly with an attorney on-staff. Additionally, the company employs the part-time services of a consulting attorney whose firm specializes in multi-level marketing. In effect, the company has one and a half dedicated attorneys. Management invites attorneys to interview and confirm Direct Access’ counsel.

Counsel’s responsibilities will be to oversee the legal aspects of business operations. They will also screen representatives, review contracts, affirm product claims and monitor the company’s compensation program to ensure it complies with state and federal regulations, fully and without question....

< Back to top