More companies entering the direct selling space are opting for a cloud-based business model that combines skilled suppliers, online office platforms and strategic partnerships.
Editor’s Note: This is the second installment about the virtual social selling companies that are making an impact that began in with July 2018 cover story.
Direct selling startups used to require major capital and widespread connections, but the field has drastically changed. Today’s companies can launch their operations virtually through a cloud-based structure without a brick and mortar location to hold them back, and even under resourced organizations can provide fierce competition by leaning on trustworthy third-party suppliers to provide access to a specialized manufacturer without the massive overhead. Now almost anyone can play.
“Everything we do in business should be working towards the goal of growth in what we want to accomplish. If someone isn’t helping us move in that direction, whether it’s a vendor or an employee, we have to have that conversation and see if we can make that correction and, hopefully, we can work it out.” – Paul Rogers, CEO, PrimeMyBody
Barriers have disappeared, companies are nimbler, and customers are engaging like never before thanks to these virtual infrastructures. The systems most traditional companies rely upon are the same systems that tie up profit margins, bog down growth, limit the talent pool to highly specific geographic regions, and prevent expansion from happening any faster than a contractor can build. But this new trend, which embraces agility, lean operations budgets, and executive teams scattered across the country, has the potential to allow companies to adapt more readily to market fluctuations and not only stay in the game, but potentially lead the pack.
For the renegade companies who are paving the way with these virtual infrastructures, the giant, expensive brick and mortar offices are gone. And so are the gate keepers.
All Relationships Require Communication
Much like the leaders of Toyota and Honda, PrimeMyBody CEO Paul Rogers believes holding suppliers to a high level of communication and acknowledging that they’ve already invested large sums of their own capital into their manufacturing processes is essential for success. “I don’t take anything for granted,” Rogers says. “I don’t want a vendor to ever feel like they are disrespected by me, and I don’t want to feel like I’m not valued by a vendor. That takes regular communication to make sure they are a part of achieving your ultimate goal. Everything we do in business should be working towards the goal of growth in what we want to accomplish. If someone isn’t helping us move in that direction, whether it’s a vendor or an employee, we have to have that conversation and see if we can make that correction and, hopefully, we can work it out.”
The “organization as machine” model is being replaced by the new architype of “organization as organism.” Instead of the stiff, sluggish machine, with its layers of bureaucracy and expensive red tape, the organism is agile, and quick to adjust as needed to its environment. – McKinsey & Company
For third-party companies like the ones Rogers works with, PrimeMyBody isn’t the only one in the partnership with skin in the game. The suppliers’ livelihoods depend on the success and health of their client’s business. If one succeeds, the other does as well. If the client stumbles and takes a financial hit, so too goes the supplier.
PrimeMyBody’s 2018 sales totals of $48 million is a real-world example of how trustworthy outsourcing can take a company to the next level. And research supports it as well. In fact, according to Whitelane Study, 89 percent of clients who have outsourced claimed to be satisfied by the services provided by their third-party agents.
Transitioning from Organization to Organism
New trends can cause upheaval for businesses not willing to adjust their day-to-day rhythms and customers are picking up on it. Even if it’s not on the tips of their tongues, consumers understand market disruption. It’s why they call an Uber instead of a cab, why a new outfit typically means a delivery on the doorstep rather than a trip to the mall, and why shipping that isn’t free and fast can be a deal breaker. We don’t buy like we used to.
Unfortunately, embracing market disruption isn’t something every company is equipped or willing to do. Companies like Blockbuster learned the hard way that slow adaptability is no adaptability and faced dire consequences. What was missing, in part, in these dying organizations was a lack of flexibility. There was no room to be nimble or move quickly. In The Five Trademarks of Agile Companies, a 2018 article from McKinsey & Company, the “organization as machine” model was described as being replaced by the new architype of “organization as organism.” Instead of the stiff, sluggish machine, with its layers of bureaucracy and expensive red tape, the organism is agile, and quick to adjust as needed to its environment.
“In the 2009 downturn, many of the traditional real estate brokerage franchises had to go out of business because they couldn’t deal with the financial swings in the market. In our model, we can adapt to pretty much anything the economy could throw at us without much financial impact either way.” – Glenn Sanford, Founder & CEO, EXP Realty
That’s the structure EXP Realty Founder and CEO Glenn Sanford followed when he launched the company in 2009, in the wake of the 2008 housing market crash. Launching in a year when getting a mortgage was extremely difficult, he needed to circle the wagons and pitch every expense over the side that he could.
“In the downturn, many of the traditional real estate brokerage franchises had to go out of business because they couldn’t deal with the financial swings in the market,” Sanford says. “In our model, we can adapt to pretty much anything the economy could throw at us without much financial impact either way.”
Sanford’s company is entirely virtual, from the 17,000 plus real estate professionals who work for him to his executive team spread out across Nevada, New York, Arizona and Massachusetts, just to name a few locations. Sanford, who runs his real estate company from a casita over his garage, believes the adaptability and flexibility the cloud infrastructure provides is a benefit that a company with an on-site team couldn’t fully appreciate. “We have collaborations with masterminds taking place throughout the day in our virtual world, which really gives us an unfair advantage to innovate,” he says. “We take working together and collaborating together to a different level.”
Longer, Happier Work Days
Employees in a virtual office may not sit around the same conference table, but they’re showing up to meetings and working together on projects just the same. Cloud-based companies share and contribute through applications like Zoom, Google Docs and Facebook group chats. For eXp Realty, their virtual world is an elaborate 3D campus built on the Virbela platform, the same one used by the U.S. Navy and Stanford University.
Many company leaders who depend on a virtual team, like Liv Labs founders David and Debbie Reeder, report that the pros of relying on a remote staff greatly outweighs the cons. Aside from the savings to the bottom line, a widespread workforce makes their company more immune to local or regional weather problems, and the productive hours of a workday are considerably longer, with the West Coast continuing to work long after the East Coast team has logged off. “It gives us the ability to use the very best people in their specific areas of expertise without requiring them to be in one location,” David Reeder says.
“Being virtual gives us the ability to use the very best people in their specific areas of expertise without requiring them to be in one location.” Liv Labs Founder David Reeder
Much like the co-prosperity of the supplier relationship, a remote workforce is a happier workforce. “They obviously enjoy where they live,” Debbie Reeder says. “We’re not having to move them. They’re able to work in an environment, whether it’s a home or small office, with people they thoroughly enjoy.”
As an added bonus, Debbie gives the remote working model credit for providing them with the resources to hire more talent. As a young company, they are able to employ an entire graphics team who work on multiple projects simultaneously, rather than the one creative professional they would likely be able to afford if they were paying for the overhead of a brick and mortar headquarters.
Ron Williams, CEO of ÜFORIA is appreciative of being able to work with competent partners who know what they are doing. “When you take myself and my ‘lean and lethal’ team, and you couple that with great strategic partnerships, and then wrap everything around a virtual model that is well funded, you basically have all the upside—basically minimizing most of the risk,” Willams says. “I like that, because as we all know the percentages of success year one and year two are very low. I think that we have put everything in place to maximize our opportunities. And it’s proving to work for us.”
A New Hybrid Evolution
Operating in the cloud doesn’t have to be all or nothing to reap the benefits, as illustrated by cosmetics company Maskcara Beauty, whose 2018 sales reached $24 million. What launched as a virtual company, has grown into more of a hybrid–transitioning some of their remote workforce into in-office employees–as the company has expanded and evolved. “We are so young as a company, so we are learning, adjusting and relearning constantly,” says Maskcara Beauty founder Cara Brook. “We want every employee to be in the environment that helps them thrive.”
What direct selling leaders who have embraced this trend know is that success in the digital age will require an unusual amount of agility. That means finding reliable partners who can be entrusted with valuable segments of the business–whether that be an executive working from home or a third-party vendor running the manufacturing process–and leaning into that trust to invest in a long-term and loyal relationship that exudes empathy and operates transparently.
Maximizing Revenue Per Employee (RPE)
The virtual movement is about maximizing revenue per employee, an important financial ratio used to gauge the success of a young, growing business. Since the largest expense for all companies are their employees, the more revenues that can be generated for each employee the greater efficiency for the company. It shows what companies are getting in exchange for human expenses.
RPE is not only a key indicator that reflects a company’s ability to sustain growth, it also measures productivity and how efficiently a company operates with their given resources. And greater efficiency means you are doing more with less, which translates to expanding margins and improved profitability. RPE has been an important metric for the growing tech industry for years and is becoming an increasingly important measure of being on the right track.
Virtual Social Selling Companies Influencing Industry Trends
Founder: Terry Lacore (2010)
Info: Asia business and South America No home office for US business, international operations have offices
Founder: Glenn Sanford (2009)
Info: Agents in all 50 states and 3 Canadian provinces help clients with their real estate purchases.
Founders: Jason Camper and Paul Gravette (2012)
Info: Around 55 full time employees and no home office
Founder: David & Debbie Reeder (2018)
Info: Less than 10 employees
Founder: Cara Brook (2013)
Info: Hybrid model which combines both a virtual team and minimal in-office staff
Founders: Josh & Jenna Zwagil (2014 & 2017)
Founder: Paul Rogers (2015)
Info: Offices in Dallas and Las Vegas
Founder: Brian Underwood (2015)
Info: Only 15 full time employees in sales and marketing at Louisville HQ
Founder: Andy McWilliams (2017)
Info: 10 employees
Founder: Ron Willams (2018)
Info: No traditional office, less than 10 employees