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LightYear: Potential Market Share & Comparison To Nutrition Businesses

August 2, 2010

For business analysis purposes, I cover start-up costs, break-even scenarios, and market growth potential.

Several people asked me to explain these considerations in writing, so here are a couple emails sown together that I’ve used repeatedly.

LightYear’s offer gets a rep free service in exchange for 3 customers.  That’s $60/month ($720/year) for taking the time to get 3 customers.  There’s no better deal in wireless, period.

Our $299 Rep Enrollment Fee + $49.99 Monthly Fee:

  • Includes a free cell fone (up to a $65 phone or $40 discount on a more expensive phone).
  • Gives you 3 websites, contact manager, email autoresponder, 25 leads (with contact info).
  • Earns you $100 for every person you enroll as a rep.
  • Gives access to a significant residual from multiple sources (for example, 1) wireless, 2) VOIP, 3) web hosting).
  • And at a bare minimum, if you get 3 customers on any prepaid wireless plan, every month you have at least 3 customers paying their bill, LightYear then pays your $59.99/month ($720/year) unlimited wireless bill for years to come, which nearly covers your entire first year’s cost of doing business ($299 + $49.99/month = $900 over a year).

So that’s why I think we can get 1% of the $160 billion changing hands over the next several years.  Now compare that to the nutrition industry’s $20 billion annual revenue (plenty more about that below), which has been completely super-saturated with companies and reps (not to mention endless miracle-cure stories) over the last two decades.  It’s MUCH easier to recruit into our wireless business.

A typical nutrition business usually has an enrollment fee anywhere from $200 or $400, plus a product autoshipment of about $100/month. That totals around $1500 for the first year’s cost of doing business. Now how do you break even? How many customers can you get, and what’s the commission for that? How many customers are already paying $50 or $100/month for a juice or supplement? More than likely, for most people this is a new expense, and you’ll end up only getting reps, not customers. So to cover your cost of business, you’ll need to recruit at least 10 to 20 reps (probably many more than that, actually) to break even … and then those reps will have to do the same to break even. This has been the network marketing model for the last two decades.

With wireless, we’re saving people money on a bill they already pay, so they’re not budgeting a new expense. That means we can actually get customers! Plus, LightYear has built such a fortress of a business that it bars most competitors from challenging, just because of the start-up costs. Consider:

  • LightYear is a publicly traded (http://finance.yahoo.com/q?s=LYNS.OB), veteran telecomm company, with a $100+ million market cap; how many other start-up companies have that kind of capital, to compete with them? A lot of direct sales wireless companies start-up every year, but the barrier to entry is very high because of the support infrastructure and big contracts necessary to succeed. Most companies won’t make it in the telecomm business. On the other hand, it’s very inexpensive comparatively to create a nutrition product and company.
  • If you lost your job, which bill would you stop paying firstyour health juice bill or your cell phone bill? It’s obvious how almost all people would answer that question. And that’s without getting into deep analysis about what industries are increasing/decreasing in this awful economy.
  • How many legitimate customers do you find in the direct sales nutrition business? In that sector of the networking industry, customers (and reps) cancel their autoship because they can’t afford to buy products every month that they did not already use. Whereas in the wireless business, everyone has a cell phone. We simply show them how to take a bill they are already paying, use Lightyear and save money. It’s that simple!
  • If we generously assume that the supplement market is understated by a whopping 50% (see the multiple quotes below), making industry revenue closer to $40 billion (as some companies claim), that’s still tiny compared to the wireless market at $200 billion in 2009. So the wireless industry is at least 5 times bigger than the supplement industry. It’s probably closer to 10 times bigger, with 100 times less competition: there are easily 100 MLM nutrition companies for every one MLM wireless company. So the final calculation is: 100 times more competition in an industry one-tenth the size. Which industry offers a better chance to make huge money?

To summarize:  the wireless industry has approximately 10 times the annual revenue of the dietary supplement industry ($200 billion vs. $24 billion), but the dietary supplement industry has about 100 times the number of direct sales companies than the wireless industry does, and the wireless industry is just starting to heat up, while nutrition has been running strong for decades. With wireless, in a bad economy we’re saving people money on a bill they already pay, instead of trying to get people to budget a new expense for nutrition.

Now the stats and sources:

http://www.themedica.com/industry-overview.html
“According to the Office of Dietary Supplements, consumers in the USA spent $20.3 billion on dietary supplements in 2004.”  ‘Dietary Supplements’ comprise “vitamins, minerals, herbs, botanicals, amino acids, whole foods, nutraceuticals, etc.”

http://www.webmd.com/diet/features/truth-behind-top-10-dietary-supplements
“Total sales for the U.S. dietary supplement industry in 2006 are estimated at $22.1 billion, with vitamins accounting for $7.2 billion of that, says Patrick Rea, editor of the market research publication Nutrition Business Journal. Included in this total are not only sales of vitamins, but also those of minerals, herbs/botanicals, sports supplements, meal supplements, and weight loss products.”

http://nutritionbusinessjournal.com/supplements/
“NBJ’s analysis of the $23.7 billion U.S. dietary supplement industry.” (2009)

http://subscribers.nutritionbusinessjournal.com/supplements/sales_growth_sputters/wall.html
’09 Sales Growth Sputters in Every Nutrition Category as Economy Takes its Toll
Although affected less than food and personal care companies, many supplement firms struggle to expand

Jun 1, 2010 12:00 PM

“Attempting to encapsulate in several thousand words how a $108 billion [global] industry fared over the course of a year is never easy, but the task is made that much more difficult when you’re talking about a year like 2009 and a market as diverse as the U.S. nutrition industry. Like much of the rest of the U.S. economy, many nutrition companies struggled to grow last year in the face of soaring unemployment, plummeting consumer confidence and a near-frozen lending environment.”

http://subscribers.nutritionbusinessjournal.com/direct/supplement_sales_swell/wall.html
Supplement Sales Swell in Practitioner Channel, but Shrink via MLMs in ’09
Both channels benefit from growing consumer interest in wellness, while pricing and competition hammer many network-marketing companies

Apr 1, 2010 12:00 PM

“Listen to dietary supplement companies selling via the healthcare practitioner and network-marketing channels talk about how their businesses fared in 2009, and you hear two very different stories. On the one hand, both practitioner and multi-level marketing (MLM) supplement firms benefited last year from the same consumer forces that lifted the overall sale of dietary supplements. As Americans lost their jobs and watched their savings evaporate, many turned to vitamins and other nutrition products to protect the one aspect of their lives they felt they could still control: their health. ‘Prevention became more important,’ said Scott McCloud, general manager of Enzymatic Therapy‘s practitioner supplement business, Integrative Therapeutics Inc. (ITI). ‘This, along with the media reports on cold and flu, had a definite impact on immune-support product sales in the second half of 2009.’

“On the other hand, however, growing competition from online and brick-and-mortar retailers — which both engaged in deep discounting last year — and consumers’ general lack of disposable income conspired to eat away at U.S. supplement sales growth in the MLM channel in 2009. ‘Mannatech’s business in 2009 did not match our expectations,’ acknowledged Robert Sinnott, co-CEO and chief science officer for the Coppell, Texas-based MLM, which sells a variety of nutritional supplement products. Although 2009 may not have been a year to write home about for Mannatech and other nutrition MLMs, of all the types of network-marketing companies operating today, those offering health-related products tended to perform best last year. ‘[MLM] companies selling supplements and personal care products are the only ones doing very well,’ said Scott Van Winkle, managing director of Boston-based Canaccord Adams. ‘In this economic environment, trying to sell family and friends products like candles and jewelry is extremely difficult.’”

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