Youngevity (Pinksheets: JCOF) CEO Steve Wallach talks with the Opportunist’s Managing Editor Leslie Stone about how his company strives to help people live younger longer, why he decided to take the company public and how home-based businesses can reignite the country’s entrepreneurial spirit.
“One thing our country has lost is the entrepreneurial spirit and skill set that we were founded on,” says Steve Wallach. “In today’s environment, entrepreneurs who start companies wind up stuck and struggling. There is a 98% failure rate and most small businesses go out of business in the first three years. Critics of network marketing and direct selling like to point to failures too, but if you invest your time and if you fail you have less at risk. If you invest $300,000 in a franchise, you are in debt to the franchisor—and you still have to pay employees and show up every day. You would be lucky to eke out a profit of $50,000 to $60,000 a year.”
Wallach says most people are so conditioned to failure that they are numb to the world of opportunity that his industry provides—until they experience it for themselves. “Most people are so used to showing up to work every day and putting in a day’s work and going home and working some more,” he explains. “They think not me; I can’t do that because they are so conditioned to failure. What’s the worst-case scenario? Failure if you give up? Lost time and energy? You are really investing time versus trying to start a traditional business.”
Opportunist: What are some of the benefits of the direct-selling business model?
Wallach: Doug Firebaugh, a famous trainer who worked with us, said this industry is really self-improvement disguised as a business. It teaches you a lot. You learn from so many other people—about their successes as well as their mistakes.
One of the best things about this business is that it offers the upside of the opportunity to just about anybody. All it takes is a desire to succeed and a willingness to learn. That is much more important in this business than a college degree. In fact, training is almost irrelevant. No unique skills are required other than a bubbly personality and a willingness to share our message and our product with people.
Opportunist: How did you get into the industry?
Wallach: I have been involved in some capacity for about 22 years. My father, Dr. Joel Wallach, introduced me to the concept as a teenager in Oregon when I accompanied him to Amway meetings.
Years later, when my wife and I were newlyweds, we became involved with a company my father co-founded and was master distributor of. She was working full-time and I was going to college and working at night, but we built a significant residual income. This was before the Internet and email, so we didn’t really know how business was doing until six weeks after the fact. Checks and statements would be mailed and so forth, but there was no way to really gauge our progress other than by who was showing up at meetings. Beyond that, we really had no clue. [Laughs] Eventually, our monthly residual income grew to more than what my wife and I were making combined in an entire year at our jobs.
Opportunist: Did you always imagine you would become an entrepreneur?
Wallach: I started a traditional business right out of high school because I thought that’s what I should do. I had the best intentions but soon learned how difficult it was to pay the rent and make payroll. Most small business owners have essentially bought themselves a job that they constantly struggle to keep open and operating—especially in a bad economic downturn and recession.
In the direct-selling business you don’t need a storefront. You don’t need to inventory products or do the things that tie you down in a traditional business. You can work night or day—from anywhere that you can login to a computer. You can even manage your business while on vacation. A day at the office can be a day out on your boat with your friends. [Laughs] We enjoy time freedom and financial freedom. That’s what residual income provides.
Opportunist: Tell us about Youngevity.
Wallach: We started selling our health, wellness and personal care products out of my father’s garage in 1997. The neighbors did not complain until trucks and forklifts started showing up [Laughs]. Then one day we got a knock at the door from The City saying we could not run our business out of the house. So, we moved to a small facility in a business park in San Diego, until the Internet bubble and the booming economy caused us to grow to the point where we decided to buy an empty commercial lot and build the 58,000-square-foot building in the Eastlake suburb of San Diego; where we are headquartered today. We have our distribution center here and we lease something similar, yet smaller, in Auckland, New Zealand and we have our executive offices in Windham, New Hampshire.
Opportunist: How did you come up with the name?
Wallach: The late Art Linkletter spoke about the term youngevity on Tom Chenault’s radio show. He said it’s not just about the length of life but the quality of life as well. We strive to help people live younger, longer. That is the whole idea of how we ultimately got into this industry and this business.
Our goal in starting this company was to continue educating people on health and wellness through nutrition and providing nutrients. My father’s background goes back to the 1960s when he received dual degrees in agriculture and veterinary medicine. He began his work doing conservation and wound up working with Operation Rhino in South Africa; helping save the white rhino and African elephant from poachers by moving them to game preserves. He went on to write a textbook and eventually worked on a project with Marlin Perkins [of Mutual of Omaha’s ‘Wind Kingdom’]. Mr. Perkins had received a multimillion-dollar grant to study the effects of pollution using zoo animals around the world. He then telegrammed my father and asked him to come to St. Louis to work with him. So, my family moved and I was born shortly thereafter. The whole goal and concept of this business was to continue what my father learned along the way.
Opportunist: Tell us more.
Wallach: Back in the 1980s and 1990s nutritional education was not mainstream. When we started this business medical doctors would warn against supplements, saying they were potentially dangerous or mere quackery. Today, supplementation is mainstream and we are seeing a groundswell of doctors getting complementary licensing to go with their main practice. We’ve got Dr. Oz saying the same things on national TV that my father has been saying for over 30 years.
In 1993, for example, 1,200 people showed up to hear a lecture that my father gave. It was recorded and over 300 million copies of the ‘Dead Doctors Don’t Lie’ audiocassette tape were duplicated and circulated. Many companies were utilizing it as a marketing tool to educate people on health and nutrition. Today people say ‘Duh, we know all that,’ but in its day it was controversial.
Opportunist: We understand your father played a crucial role in making supplements as widespread and accepted as they are today.
Wallach: Yes. He submitted several petitions to the FDA making the case for supplements such as calcium and selenium. The FDA isn’t real thrilled with approving the claims of health benefits of various supplements but they eventually authorized them. Now companies can use labels on their products stating that calcium helps build strong bones and selenium may reduce the risk of certain cancers and carcinogens in the human body, etc. Youngevity does not get credited with filing the claims; the claims state that the FDA has determined and authorized them. Other companies have done the same and there are about a dozen proven nutrient claims. We have achieved a set of three different claims so far. One of our claims was for Omega-3Fatty Acids in the reduction of sudden death from heart attack, heart disease and stroke. We sent a letter urging the FDA to get this information out because 1.5 million Americans die of heart disease every year. We believe, based on research, that educating people about consuming adequate fish, fish oils, and algae can greatly reduce the risk of death from heart attack and stroke and save a million American lives per year. Ultimately, all of Europe has also accepted the claim because the FDA approved it. Did we cause that? No but we had a part in that. Achieving health claim petitions for the nutrition field and the general public were huge accomplishments and inspiring moments that continue to hold significance for us. We are grateful for anything we can do as a company to help people make dietary changes worldwide.
Opportunist: Can you share some Youngevity success stories?
Wallach: You know, we have seen all sorts of people achieve success—people with zero experience who just started telling people about the products and were enthusiastic about helping people with their health.
Bernie Owens in Corning, New York, had been a maintenance man with the Hilliard Corp. for 30 years when he heard a radio interview with my father. Berne suffered from eczema and went to numerous doctors but it would not go away. He ordered a few of our products, gave them a try, and got better. When people started seeing his personal health improve he would refer people to us, and about 10-12 years ago he agreed to start selling. Now he is one of our top sellers and buys a new vehicle every year. In fact, his wife, Donna, who scolded him for buying our products, is now also one of our biggest advocates. Bernie and Donna are not slick salespeople. They are salt of the Earth people who simply share their story with others. We have numerous stories like theirs.
Another of our top distributors, Sheryl Morley, joined us 16 years ago as a high school dropout. Her highest level of success was working at Taco Bell. She lives in Washington, D.C., and, thanks to this business, is able to stay at home with her two kids and it’s just an amazing success story.
One of our top distributors in Utah, Nephi Wayman, was a plumber by trade. He has a great personality and a great outlook on life. He is so much better at building his distributor business than he ever was as a plumber. In fact, he was named trainer of the year last year.
Opportunist: What do you find most rewarding about your work?
Wallach: Seeing people succeed. That motivates me. I am a huge advocate of our industry. Our Industry does not discriminate. If your skill set is struggling college student you have as much of an opportunity, sometimes even more so, as a doctor or lawyer. It really matches desire and motivation with opportunity. I love that about this industry.
Opportunist: Has Youngevity received any celebrity endorsements?
Wallach: We have worked with quite a few celebrities but we are reticent to use their names without permission. One of the people involved in our company is, retired NBA basketball all-star, Theo Ratliff. Theo played professional ball for an awful long time and was known as a ‘shot blocker’ because he was constantly running around on the court, blocking hard bodies and defending against players like Shaquille O’Neal. The NBA eventually told him it was time for surgery and retirement. Former Atlanta Hawks guard Mike Glenn, who is now a TV announcer, and NBA All-Star Lenny Wilkens suggested that Theo get ahold of my father. He was put on a routine of our nutritional products and several months later returned to the game. He enjoyed two injury-free seasons before the Hawks traded him to the Portland Trail Blazers—for a four-year, $46 million contract—and he stayed for six seasons before moving on to the L.A. Lakers. Theo openly and graciously attributes a portion of his career and income to my father’s nutritional background and support. Numerous other athletes are utilizing our products. Steve Hess, strength and conditioning coach for the Denver Nuggets, openly promotes the benefits of our products. And Martin Luther King III spoke at one of our conventions a few years ago. We have worked with the King family for years.
Opportunist: Do you believe home-based businesses can improve the economy?
Wallach: Our industry can provide a huge solution and answer to our country’s economic issues. The income opportunity with a business such as ours is virtually limitless. It gives you a support structure. For example, when you’re a small business owner your neighbor might cheer for you, but he is not helping you succeed. The guy next to you that owns a tax accounting shop says hello to you in the morning and might send you a customer now and then but he has no motivation to see you succeed. In this industry, your up-line in the organization has the motivation to help you succeed and will teach you, train you, and thrives on your success. You get the benefit of other people—not just one, but many. It’s an environment of people helping each other and lifting each other up. A rising tide floats the whole boat, as they say. When everybody is pulling for you and everybody is pulling for each other, it has a huge positive impact. I have already seen it zillions of times.
Opportunist: What’s next for your company?
Wallach: Our mandate and goal when we started was to build a legacy company that would be around for generations. My father has helped to educate the world on nutrition and now the general public understands that nutrition and supplements are important. Our goal is to take that message—and this company—worldwide. We are excited to have surpassed our sales benchmarks, and our next goal is to be in the Top 12 of direct selling companies. My personal goal is for us to be in the category of Nu Skin, Amway, Herbalife and Avon in terms of household recognition.
Last year we announced that we are working with Clemson University to do research on a few of our key products. While we still rely heavily on my father’s expertise and more than 40-year career, we also have an extensive scientific advisory board. Clemson finished up their first phase of the research and they will be putting out the results of the first research of the human live cell cultures and the use of our key products and supplements. We are confident that the results will be great. We did not have to do this, but have published the results and we are excited.
We have grown tremendously in the last several years, and we became a public company last year when we merged with a public company that produces coffee. We now have a coffee roasting facility in Miami called Café La Rica that imports what are called green beans that we use to make our JavaFit line of fortified coffee.
Opportunist: What made you decide to take the company public?
Wallach: Most companies in our industry cannot or won’t become public. We wanted to be able to share equity with our employees and distributors. Our people already earn good commissions but we wanted to provide an opportunity to earn stock options based on performance, success and tenure with the company. We believe this sets us apart and helps us attract and retain terrific people.
We are excited to be a fully audited and transparent company. We believe this adds to our credibility in today’s world of uncertainty. People can be confident in our financials and know that what we are telling them is true and that what we are doing is above board and verified and validated by independent auditors.
Also, our stock is still at an affordable level compared to other companies in our industry—from Herbalife to Nu Skin to Avon—whose price-per-share is in the teens to twenties of dollars.
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in the Orlando area.
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