Over the three decades I’ve spent in this business, I’ve conducted numerous experiments to better understand what makes our industry tick.
I’ve also long suspected that many of the decisions we make are based on gut instincts rather than quantitative data.
At some point, I started to ask distributors how much their first check was. I wanted to see their response. Without exception, their faces light up and they can always recite the exact amount they received. $47.56, $523.64, $17.02, $3217.25, or even .17 cents.
Give it a shot –
ask any distributor and I’m willing to bet they’ll tell you all about their first check. They might even wax poetic about it. It’s a seminal moment in any distributor’s life. But what’s so fascinating to me is that the amount of that check didn’t matter.
Just like the athlete who frames their first check, distributors see this as an accomplishment, not just a payday. Even if that check amounts to .17 cents, this is a big deal.
That first check shifts them from an employee to an entrepreneurial mindset.
For many, it represents their first voyage into the unknown. For others, it symbolizes a fresh start or a new chapter in life. For everyone, it’s encouraging. Getting that first check validates their efforts and legitimizes the opportunity. At this point distributors realize that they can actually make money at this. It’s a big moment.
But corporate leaders often don’t realize this. We can easily fall into seeing checks as a mere payout. Money paid for services rendered. And we structure our compensation plans accordingly. Conventional, industry-wide thinking says that distributors need to make $500 a month in order to stick around. That’s an old-wives’ tale. Might as well chalk it up to waiting a half hour after eating to go swimming. There is a small truth to the idea (I’ll share that later), but it does not capture the REAL truth.
Instead of the $500 rule that’s only rooted gut instinct, I want to propose something different. If every distributor earned $1 within their first month of business, retention rates would skyrocket.
Don’t believe me? I don’t blame you. But let’s take a closer look at the numbers.
Being CEO of LifeVantage comes with certain perks. When I get the curiosity itch, I can scratch it with a study. A while back, I asked our company to find out how much someone needed to be earning to stay “active”. But first we had to quantify that word. We looked at the numbers and classified someone as “active” if they were purchasing product on at least a monthly basis. Any less than that meant they were not regular customers and definitely not engaged in the business opportunity. We studied all of our distributors counting the month they enrolled and the six months following. Although these numbers are only a snapshot in time at a specific company, I can say from experience that they are fairly consistent across the entire industry.
What we found was fascinating. When distributors received $0.00 during that first seven months, their activity rate hovered around 20%. That’s roughly industry average. But when distributors earned just $1.00 to $25.00 cumulatively during those first seven months, their activity rate jumped to 64%. Let me say that again.
The difference between 20% and 64% was $1 over 7 months.
From there we see a modest upward trend: 73% when distributors earn between $25.00 and $75.00 and then 80% for $76.00 to $300.00. Again, that isn’t in only one check. That is CUMULATIVE over their first seven months. While activity rates eventually climb to 97%, when distributors earn around $3500 cumulative, (or $500 a month–this is that kernel of truth I was referring to earlier), by far the biggest retention increase happens at $1.00.
So, if during their first half year of business, each of our distributors earned just $1.00, our activity rates would quadruple.
I’m going to pause for a second while we all let that sink in.
Now imagine if every distributor made that first dollar in their first month. I call this “The First Dollar Principle”. I know many industry experts out there will probably scoff when they read these. They will, after all, think that $1.00 is a paltry amount. But I argue that it isn’t. For distributors, this is much more than a job. Always will be. It’s a dream. It’s a second chance. It’s emotional. And it’s scary. When a distributor opens that first check or sees the initial deposit come through across their screen, they are a legitimate, fully-fledged business owner. At that point, it becomes official.
There’s a psychology behind the First Dollar Principle.
We know we are speaking to individuals that are making the shift from an employee mindset to an entrepreneurial mindset. In psychological studies, scans of the brain have shown a physical change as they make this shift, engaging the entire prefrontal cortex. In those same studies, entrepreneurs have been shown to share a common characteristic known as an internal locus of control. This means they believe their environment, in this case their business success, is controlled by their own actions. In other words, we don’t see our lives as merely results of “luck” and “fate”. Success or failure has some bearing on our personal actions and abilities. This means we are willing to adjust our approach, learn and grow, and work hard for what we want. However, it can also lead to a sense of failure if things are taking longer than anticipated, or we go too long without seeing any fruit from our labors.
A quicker, albeit possibly smaller, first check won’t take any additional effort from leaders, but it might require a slightly different approach. I suggest that we spend more initial time with new distributors. Sit with them. Help them make calls, contact, and follow up. Offer to take on some of the initial legwork. Be there for them every step of the way.
It takes a lot of work to find a new business partner – so BE their partner. Imagine if within a few hours, we helped every new distributor do what it takes to get their first check.
As leaders, we must wrap our arms around our fellow entrepreneurs and help them catch the vision at the earliest possible moment.
Remember, we entrepreneurs are a resilient bunch – just a little success can sustain us for a long time. Simple validation nearly always leads to greater rewards.
I spoke with one of our most successful leaders the other day. She runs a massive organization, and she takes on all the usual obligations that come with the territory. It’s safe to say she’s busy. However, she told me that one of her most fulfilling responsibilities is spending extra time with all of her new distributors. She schedules Skype calls with all of them. Sometimes she flies across the country to work with them one-on-one. And when you look at her retention rate, it’s off the chart. Her newcomers might not be making a lot of money initially, but they have that first dollar and they are fulfilling their dreams. And for that reason alone, they’ll keep working. Which as we all know turns into larger payouts for them in the long run.
You can’t put a price tag on a dream.
And if we could, it might be much smaller than we think. Let me reiterate those stats from earlier: when distributors earn nothing over the first seven months they’re in business, only 20% stick around. If we can help them earn $1.00 (cumulative!) in that same time frame, 64% do. This is massive.
If we truly believe in the power of entrepreneurship, we must do everything in our power to support our fellow entrepreneurs. Help them achieve. Someone did it for us. Let’s repay the favor. Yes, this is good for business. But imagine everyone out there who never saw that first check and simply gave up on their dreams when $1.00 could have made the difference. Let’s help them get there. It’s a small price to pay for so much good.
President and Chief Executive Officer of LifeVantage (LFVN). After more than 26 years of experience, co-founding two successful multi-level-marketing companies, and a long, successful track record of growth across the industry, Darren Jensen is delivering results, driving growth, and setting a standard of excellence. And he does it all with a down-to-earth approach that puts people first. With a diverse background and a passion for service, he takes a unique approach that combines human understanding, 3-dimensional insights, and a lot of hard work into pioneering new science and a thriving company.
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