Lifevantage is a Utah based wellness company which was started in 2003. The range of Lifevantage products are all made with the common goal of 'promoting healthy living.' In 2009, they decided to give up on traditional retail sales. Instead they chose to promote their products using multi-level marketing. In June 2017 they estimated that they had 64,000 active distributors in their international network marketing system.
Here at The Finance Guy, we believe that you can't make money with MLM, but we'll give Lifevantage a chance to prove us wrong. Our review of Lifevantage will take a close look at their business opportunity. We want to find out if this is a legitimate way to earn an income, or just another MLM.
In 2016, Lifevantage reported revenue of US $207 Million, which earned them 68th place on the 2017 DSN Global 100 list. There is no doubt that they are turning a profit, but we want to know if Lifevantage distributors are turning a profit from the MLM opportunity.
What Does Lifevantage do
Lifevantage describe themselves as a 'science-based nutraceutical company dedicated to helping people achieve healthy living'. Their flagship product appears to be Protandim, which they say can reduce the effects of aging. They explain that the antioxidants in this product can help your body on a cellular level. Along with fighting back the hands of time, healthy cells will also improve your energy levels in the day and your quality of sleep at night.
Lifevantage also produce a large range of other products which look similar to most supplement based mlms. There's a weight loss range, a cleanser, something for energy, and some cosmetics for those that want to be as beautiful as possible. What did make Lifevantage stand out is they make a product for dogs. Petandim allows you to give your best friend the benefits of science-based anti aging supplements.
How do you Make Money with Lifevantage
According to the official Lifevantage opportunity webpage, this is 'The Opportunity of a Lifetime'. They say they have the tools and training which are part of their 'proven plan', to help you 'get a quick return on your investment, and earn long term residual income'. This all sounds great but there doesn't seem to be much detail.
To find out more we watched this video explaining the Lifevantage compensation plan:
The 16 minutes of video is an attempt to explain the 2017 Lifevantage Compensation Plan. We decided that we'd do our part and read through the full document and share our own findings below:
Like the video, the compensation plan starts off explaining that there are 8 ways to earn with Lifevantage. We see this as an early warning because we've seen a lot of MLMs with overly complicated ways to earn. Usually the result is that most distributors are losing money. Having said that we'll go through the Livevanatage ways to earn:
1. Retail Sales
You can earn a retail margin from Lifevantage when customers purchase either directly from you or through your Lifevantage website. We believe that retail sales are your best option to make money in any MLM. Lifevantage calls retail the 'most obvious way to earn money', but doesn't really tell us much more than that about it.
If you join any network marketing company, it's important to remember that sales are a key part of your business. If you're not selling product, then you're not making money. In our opinion, building a retail customer base is critical to making money in MLM
2. Smart Start Bonus
The Smart Start Bonus is designed to reward you for signing on either new preferred customers or new distributors to Lifevantage. This bonus is paid for the first calendar month after you have enrolled a new customer or distributor to Lifevantage.
Depending on how much Personal Volume (PV) you have generated, you can earn a smart start bonus of either 30% or 40% on all Lifevantage products purchased by new preferred customers. You can also earn a smart start bonus if your newly enrolled distributors join with either a silver, gold or platinum pack.
3. Launch Bonus
This is similar to the smart start bonus except it's paid on customers and distributors recruited by others in your downline organization. Lifevantage call this a 'trickle up' bonus. There are 6 levels of launch bonus that are paid to the next eligible Lifevantage rank in the upline.
Depending on your rank, and which package the new distributor buys, you might earn a launch bonus ranging from $2.50 up to $50.00. To qualify for the launch bonus, you and your customers must buy enough Lifevantage products to generate at least 200 PV per month.
4. Royalty Commissions
Royalty commissions are the monthly income you can earn from all product sales within your Lifevantage organization. In order to qualify for more royalties, you need to obtain a higher rank in Lifevantage. Rank is achieved by recruiting a downline and generating enough product sales to meet the PV and organizational volume (OV) requirements.
The amount of commission which you can earn at each rank, and the qualification criteria is shown in the image below:
Lifevantage proudly tell us that they pay commission of up to 43% on all products purchased within your organization. The most you can earn per sale is 9%, but it is true that a total of 43% is paid to all the different levels in the MLM.
5. Generational Matching
Once you reach the Lifevantage rank of 'Pro 3' or higher, you will qualify to earn a monthly generational matching bonus. This amount is calculated based on the royalty commissions earned in your downline. It is paid on up to 5 levels below you in your organization as shown in the image below:
Lifevantage can pay up to 30% in generational matching bonuses on any royalty commissions earned in your organization. The video we watched explained that this bonus kept people at the higher levels in Lifevantage motivated to help everyone in their downlines. By this we assume they mean that this bonus ensures that people in your upline will want you to keep buying product.
6. Elite Bonus Pool
This monthly bonus is only paid to those who have reached the level of Pro 7 or higher with Lifevantage. Every month Lifevantage will take 4% of all sales made in all organizations in the MLM, and pay this as an Elite Bonus Pool to those who have reached the highest ranks.
The higher up the ranks you go, the more Elite Bonus you can earn. 1% is shared with Pro 7, 8, 9, 10. Then another 1% is shared with Pro 8, 9 10. A third 1% is shared with Pro 9, 10. The final 1% is only shared with the Pro 10 members of Lifevantage.
What we see is that 4% of every dollar you spend on Lifevantage products is funding this bonus. You are paying an extra 4% so that those at the top of the system can earn this bonus.
7. Achievement Bonus
This bonus is a one time payment made to those who reach the Pro 10 levels with Lifevantage. The payment can range from $100,000 at the 'master level' to $500,000 at the Presidential level'.
8. Business Centers
If you reach the Lifevantage rank of 'Premier Pro 5', then you will be eligible for your first new business center. By the time you achieve a rank of Pro 10, you will have been eligible for a total of 4 new business centers.
A new business center allows you to sponsor yourself and start a new Lifevantage business in your own downline. You can then earn commission at two levels on any sales made under your new business center. If you strategically place all four new business centers, you could earn on up to 5 different levels from the sales generated by the lowest business center.
Are Lifevantage Distributors Making Money
We had a look at the Lifevantage 2017 US Income Disclosure. The first thing we noticed was the the following statement. 'There were approximately 63,000 total U.S. Distributors during the period, with approximately 48,500 U.S. Distributors paid in the same period.' After some simple math, we see that 14,500 or 23.02% of US distributors earned no commission in 2017!
We then see a table showing what was earned by those who did earn any commission in the 12 months to June 2017. This is shown below:
Once again we did some math and we could see that even at the Pro 5 level the average commissions paid in the 12 months were less than $30,000. In other words people who put in the time and effort required to reach Premier Pro 5 might have qualified for a new business center, but on average they could make more money if they worked a regular job.
According to the table, 75% of US distributors were paid less than a full time income in the 12 months to June 30 2017. An additional 23.02% earned nothing at all. This means that a total of 98.02% of Lifevantage distributors are not earning a full time income.
As a publicly traded company (NASD:LFVN) Lifevantage is required to release their financials to the public. To get an idea of how much Lifevantage distributors are earning globally, we looked at the Lifevantage 2017 4th quarter fiscal results.
We saw that for the year ending June 30 2017, Lifevantage say they paid a total in commission and incentives of $96.7 Milliion. They also tell us that globally they ended the year with 64,000 active consultants. We once more rely on our math skill and find that on average Lifevantage distributors earned $1,510.94 for the year.
The figures in the financial report include all Lifevantage distributors at all ranks. While the top 1.98% in the hierarchy might be earning more than $30,000 per year, most are not. What we can see is that the expected income from the Lifevantage business opportunity is less than $1,511 per year.
Why is it Difficult to Make Money With Lifevantage
We believe that the problem is not unique to Lifevantage. It is common to any opportunity which uses the MLM business model. The problem with network marketing is that it's designed to promote and sell products. It is not designed to help you make money. Companies use MLM because they can generate a profit for themselves, they do not use it to share the wealth.
The generous compensation plans offered by MLMs are part of the problem. Lifevantage pays ongoing commissions which add up to a total of 59.9%. The problem is that these are all included in the 'wholesale price' they charge their distributors. If you are a new Lifevantage distributor then 59.9% of what you pay will be paid as commission to people above you in the MLM
In their financial report, Lifevantage showed that commission and incentives represented 48.5% of their revenue for the 12 months to June 30 2017. While it's not the full 59.9% which would be possible if all sales qualified for all commissions, it's still a lot.
The remaining 51.5% is kept by Lifevantage. This covers the costs of production and includes their own profit. This would be the amount traditional companies earned from producing products and selling them to the wholesale market. The price paid by distributors is close to double the traditional wholesale price.
Is Lifevantage an Illegal Pyramid Scam
Multi-level marketing may look just like a pyramid scam, but it is not illegal as long as there is a product or service attached. This means that opportunities such as Lifevantage are legal, but this does not mean that they are ethical.
MLM creates an environment where there is a danger of over consumption. People start buying products because they think it's their path to financial freedom. They are not buying products which they otherwise would have spent money on.
The buying frenzy is intensified by the levels in the compensation plan. The system is designed so that people all the way up to the top of the pyramid will earn more money if you spend more. When they 'encourage' you to keep buying product is it because you are on the path to freedom, or is it because your ongoing purchases will make them money?
Can You Build an Organization with LIfevantage
If you want to build a network marketing downline organization, you will need to be constantly recruiting new members. The videos and other promotional material make it sound as simple as sharing the opportunity with a few friends, then have them do the same. Theoretically your organization will soon be growing on it's own with you collecting residuals. In reality building a MLM team is very difficult
As we saw in the Lifevantage financial results, they had 64,000 active distributors at the end of June 2017. This may sound good, but they also show us that at the end of June 2016, they had 69,000 active distributors. In other over the 12 months to June 2017, Lifevantage had a decline of 5,000 active distributors. Even with new recruits, the total number of Lifevantage active distributors shrank by 7.25% in 12 months.
You should expect to experience similar results when trying to build your own Lifevantage organization. It's possible that in any given year, you won't recruit enough new distributors to replace those who have quit. Growing your organization will mean you need to recruit enough to keep ahead of the drop out rate.
LIfevantage is not alone in this. All MLMs that we have looked at so far, suffer from a high attrition rate. It is quite common for more than half the active distributors to quit in any given year.
We believe that the high drop out rate is the reason for incentives such as the smart start bonus and the launch bonus. These are designed to get new members to spend as much as possible as quickly as possible. They will tell you that buying packs will help you get your business up and running. You might hear all about 'being coachable', and why you need to 'duplicate' what others have done. We think that these incentives are designed so that they can make as much money as possible from you before you quit.
Should You Join Lifeventure
If you are looking for an opportunity to supplement or replace your current income, then we suggest you carefully examine all your options before deciding which is best for you. If you are already a Lifevantage customer, and you love the products and believe you can sell them at full retail price then maybe you can make money with Lifeventure.
If you do decide to join Lifevantage, we would suggest that you only start with the $50 business builder starter kit. You can then buy products at your own pace to try them out and see which ones you like. You can even share samples with friends to start building a customer base and have them purchase from your free Lifevantage website.
As we saw in the video, your sponsor will tell you that the $1,250 platinum pack is the best way to join but there's also a $650, Gold pack and a $350 siliver pack. While you might get some price discounts by buying the packs, we think there's a risk you will be paying for a lot of products you don't want.
The platinum pack will be promoted as the 'best way to start your business'. But we think it's the best way for the person who sponsored you to get a $400 smart start bonus. Then all the people in their upline who are also encouraging you to buy a large package might be influenced by their potential fast launch bonuses. It's important to remember that when you buy product, the people above you in the MLM earn a commission. They might be trying to help you, but earning commission from you is also a motivating factor.
Our Final Thoughts
Multi-level marketing is a great way to sell products and turn a profit if you are the manufacturer. If you are a member of the network marketing system, then we believe it is unlikely that you will make money with any MLM.
We assessed the Lifevantage opportunity using Dr Jon Tayolors 5 Step MLM evaluation. We found that it raised all 5 red flags. According to Dr Tayolor, this would suggest that your chances of making money with Lifevantage are less than 1%.
This has been our review of Lifevantage. These are opinions we formed from reviewing the data that was available to us. We'd love to hear your thoughts in the comments section below, especially if you can share your experiences with Lifevantage.
For more posts like this, look at our list of mlm reviews.