Kelly Thayer—Deductr’s VP of Direct Sales—joins us to talk about his time in the MLM world and about his personal efforts to help distributors get the most from the MLM experience. They discuss what it means to be in business for yourself, the tax breaks network marketers can take advantage of, how distributors can mentally frame themselves as entrepreneurs or independent business owners, and how that mentality helps you get the true value out of your business opportunity. Check out deductr.com/specialdeal to learn more about Kelly’s product.
Kenny: Welcome to the MLM.com podcast. I’m your host, Kenny Rawlins. In today’s episode, we’re talking with Kelly Thayer of Deductr. Kelly has been in the industry since 1983 and has worked as a vendor, distributor and company owner. Kelly brings a lot of great insights on how we can help distributors be more successful as independent business owners. We’re here with Kelly Thayer of Deductr. Good morning, Kelly.
Kelly: Good morning, Kenny. Good to be here.
Kenny: Thanks for joining us. So the first thing I’d like to start out with—one of the things that I was excited about having you on the podcast for—is you’re actually one of relatively few people that has background on the distributor side, the corporate side, and also as a supplier to the industry. So, I’m curious how you think that changes the perspective that you bring now that you’re providing tools for companies and for distributors.
Kelly: Yes. I’m a little bit different, in that I found the industry happenchance. I didn’t even know what network marketing was. I didn’t even have a real concept of this channel, as I like to call it. A lot of people call it an industry, but it’s really not. It’s just another marketing channel. I think the term now is “profession,” but I think that’s just as it relates to the independent distributors. But I discovered it back in 1983. I had a film and video production company and I made the first MLM video for Sunrider back in 1983, for Dr. Chen’s company. And it was “An Evening with Dr. Chen.” And doing that video opened up a whole new avenue for my little video business. I discovered this incredible pond, if you will, because the industry was not an ocean. We’re a very small industry.
Kelly: And there I use the word “industry.” But it’s a small business model. But I was able to develop a very large video production and marketing communications company. And so I got to see it from the outside looking in. I worked with a lot of the owners, a lot of the leaders. We probably produced over 700 videos over the tenure that I was there, 18 years servicing that space. And then I also toyed at being a distributor. I needed to do that. I had to really understand from a distributor’s standpoint what it’s really like to build an organization. And it’s hard—really hard. It’s not what people think.
Kenny: Yeah, no, I can only imagine. I’ve seen people work it, and it is… I’m a pretty introverted person, and I just, I’m impressed with what people are able to do, and the people who are able to do it so naturally. Where you think of the stereotypes of like your brother-in-law being pushy, but there are people who are incredibly natural at it, and you don’t feel like “hey, I’m being sold something” there. You know? Trying to help people, they believe in their products, and so that’s something that yeah, I’m impressed that you ventured into that.
Kelly: And it was funny, because I had sold and gotten out of my production business, and Nathan Ricks, a good friend of mine at Nu Skin said, “come and do this Pharmanex with us.” And so I said you know? I’d been part of an organization where I’ve actually had a position, but it was part of the business transaction that I did with the company because I couldn’t really work the business and produce people’s videos because it was a conflict of interest.
Kelly: And that was an incredible experience, and had a wonderful return. I’ll just leave it at that. But I wasn’t really in the trenches. I couldn’t take any credit. The leaders really deserved the credit. I just helped orchestrate and put things together, and as part of my compensation it was “here’s the spot in the geneology and thank you for what you’ve done,” and it paid well for over a decade.
Kelly: But then, after trying my hand as a distributor, I really had to own my own company.
Kelly: And so I did get to do that, and that was a good experience. Lost a lot of money. Not as easy, again, as you would think. I liked the idea of helping—of being part of a company and selling it—better than trying to do it myself. And it was, again, a good learning experience. But I also found that wasn’t my niche either. Doing the tools part really is. I’ve kind of gone full circle. And I’ve gotten back to doing what I think I do best. That’s identifying sales tools, aids, that will help the independent business owner be more effective, more businesslike, and have a better chance at being successful in their business venture with whatever company they’re going to join.
Kenny: I like that you refer to them—I always fall back into my old habits of calling them distributors—but I like that you use the term independent business owner.
Kenny: Because I think it captures more of what it is and what we need to treat it as, as an industry or as a channel. I also like that you call it a channel, because we’ve got a bunch of people from different industries using this channel, and we kind of become a sub-industry, right?
Kenny: Because we’re not all doing healthcare, we’re not all doing makeup. We’re defining the industry as really the sales methodology and the distribution channel.
Kelly: That’s it. Yes, the distribution channel.
Kenny: But to your point, I mean these are independent business owners, and that’s one of the things that in talking to you about the tools that you’re developing and that you have out there, are helping people to be more successful as that, as entrepreneurs. And so maybe walk us through some of the tools Deductr offers to help you track your expenses. Walk me a little bit through that.
Kelly: Deductr has become pretty much my staple. I discovered the company, I was actually invited to meet with the company’s owners about six years ago. They were made up of accountants and programmers, and they designed software that would track business expenses, and wrote the tax code into it so that you could see in real time, as you swiped your card and then activated the expense and gave it a category, that that meant something in terms of money back in your pocket. And you could see in real time in a graph how much money—monthly—you were saving on your taxes now that you’re self-employed. And where this really resonated with me is… most people are W-2’s. And they don’t even really comprehend tax deductions, other than they get to write off the interest on their home, contributions that they might make to their church and charity, or contributions they might put into an IRA or an HSA, if there’s not an insurance plan where they work they can have their own. That’s it. The W-2 doesn’t get any other breaks. So they’re kind of wired, if you will, programmed that that’s all I get.
They find out about a business to make extra money, and they get all excited about making the extra income to their… you know, adding a part-time income to their full-time job. What they don’t understand is that the minute they cross that threshold and they are an IBO—as I call it, the independent business owner—there are over a hundred tax breaks that they now get that they can write off. Things that they couldn’t write off before. Their cell phone bill, their internet service, the mileage they drive around in their car now for doing business. So there was a real lack of education where they just take the 1099 with the W-2 and submit them both, and now they’ve increased their income and pay more in taxes.
Kenny: Right, yeah. And I appreciate that, because one of the things that really is, I think, going to make a big difference in the way that the industry goes over the next few years, is better training. And that’s one of the things that was included in the Herbalife settlement, was Herbalife is now going to provide training for everybody who signs up as an IBO or wellness advocate or different terms that all the companies use. But we’re going to provide better training, and not just training on the products, but training on being a business owner. And I think that that’s something that really can change people’s experience as they get into the industry—knowing stuff like you’re talking about. Because like I say, it’s tax season, I’m doing my taxes right now and my wife is an independent contractor that does graphic design. And it’s a totally different world, even thinking about it. I’ve always been employed through an employer, like you say. You’ve got, you know, the interest on your house… just very few things that you run through and it’s easy to get it done. I’ve got one job, I’ve got one W-2 or whatever comes, you fill it out, or you fill out the 1040 and you’re done. And so to really say hey, people, you’re coming in and yeah, you love this product and you want to make some supplemental income, but you are an entrepreneur and you are an independent business owner, and that’s not a bad thing. That’s a very exciting thing, and here are some tools that can help you be more successful in that. So in what you’re doing, do you provide training on all of these deductions that people can have? Or how do they, how is the best way for someone to get training on that?
Kelly: Well, our model is to contact companies. We license our software to them, and then we integrate our software with the other software companies they use. So we’re a good added value to the back office system, or to a front office dashboard, inside an app. Our software is written with APIs, so integration is fairly simple. And then, the idea is to let the company make them aware that they have Deductr. What Deductr does for the company is, we hold monthly webinars where we walk them through their accounts, show them little tips, things that they can do, and then educate them little by little on things like you can pay your children, ages 8 to 18, and that’s tax deductible. And then you pay your children and you use that money to buy their school clothes and to take little vacations, and there’s just some tricks that you can do. What we don’t do is, we’re not accountants.
Kelly: We’re not offering accounting advice. What we’re doing is telling them what’s available to them, and then they need to go to their accountant, their personal CPA, and double check with them, you know, what will work and not work. But the real value of Deductr is that it proves that you’re in business to make money. The IRS comes down hard and is coming down harder on the direct sales industry because they need to prove the intent to make a profit, instead of just treating it like a hobby. And when they’re not tracking their miles and their business appointments and activities and those expenses, and they’re just saying, you know, they’re just making them up, it’s a red flag.
Kelly: They have to have documentation. So what Deductr does is it takes all that information that’s coming in on a daily and monthly basis, and after a year it aggregates it all together to a Schedule C. When a company sends you a 1099, you have to file a Schedule C with it in order to take the deductions. New business owners don’t know that. I would say over 85 percent of independent business owners don’t understand what a Schedule C is. They just don’t know what they don’t know. I’ve actually found out that about 60 percent of corporate people don’t know what a Schedule C is, because they’re W-2’s themselves. They’ve never been a 1099.
Kelly: One of my challenges in talking to companies is helping them understand the value we add. They don’t get it because they’re a W-2. It’s not relevant to them.
Kelly: Until I get to the owner of the company, who’s most likely been a self-employed 1099 his whole life . That’s when the lightbulb goes on and they’re like, I’ve got to have this. I just had a great meeting yesterday with a fairly large company out of Dallas, Texas. The owner’s a great entrepreneur and he’s got another business that’s wildly successful and now he wants to take it into direct sales. He instantly got it. He just immediately understood the concept, the value of Deductr, and embraced it and said we’ve got to have this. And if companies would really—whether they use the Deductr product or other products that are out there—would just understand this one point, they’re doing something for the distributor that they’re not able to do themselves because they just don’t know.
And it’s a case where the company’s looking out for that independent business owner better than they can for themselves. Because if you can give that independent business owner a great experience that first year and show them that being in business for yourself more than paid for itself in the deductions. Maybe they didn’t make $5,000 that year. Maybe they didn’t make $1,000 with their company that year. And we all know there’s a high percentage of people that won’t make that much. But they might have had an extra four, five, six thousand dollars in deductions that they could write off, and then instead of only getting $8,000 or $10,000 back on their tax return the next year, they might get $12,000 to $15,000 back, because they own a business. And that’s the little shift and ah-ha moment that distributors have when they really take the time to understand where the value is. Owning your business, if you have any good accountant—by the way, if a person’s making over $80,000, $120,000 a year and plus—a good accountant’s going to say to them, hey, do you by chance have a side business? Because we can sure save you some tax dollars here. And the whole idea is to take somebody that might be in the 40 percent, 35, 40 percent tax bracket and lower it.
Kelly: Put them into a 15 to 20 percent tax range, and put more money back in their pocket.
Kenny: Yeah. And you know, one of the things that I appreciate about what you brought up is this channel or industry, however people want to talk about it, allows somebody who’s entrepreneurial or wants to make a few hundred extra dollars a month even, maybe they’re not even looking for replacement level income, they’re looking for just supplemental income. And we’re saying OK, here’s a product that you’re interested in, you’re passionate about. There’s a lower barrier to entry than going and opening up a retail shop and trying to find a product, right? So it can help people who are entrepreneurial lower that barrier to entry to starting your own business. And we do that wonderfully through providing people product, but one place where we don’t do a great job is saying, now let us help you get started as being an independent business owner. Talking about these types of things. And like I say, it’s been a new experience for me having my wife have her own business. And there are lot of things, like you say, you guys aren’t necessarily accountants, but I’ve appreciated people who are aware of what it’s like to own your own business saying “hey, you should talk to your accountant about this and about that.” And the thing that I like that you’re talking about is you’re giving people tips that they can work with their accountant, and you’re giving people tools that allow them to actually track this, so that you’re not on, you know, March 25th going through and saying, now didn’t I, a year ago, spend this on something for my business? You know? You’ve got it built up throughout the year, and you’ve got these wonderful records. You know? And that way it takes a lot of the fear out of it and makes it more exciting, because being your own business owner can be very exciting. It should be very exciting. And you know, you meet the people who are successful in this industry, and they just have an energy about them, and you want everyone to have that good experience. And like you said, this can be the difference in having a wonderful experience in the first year versus being one of these people that feels like they were duped or that it wasn’t what they expected, and that can make all the difference in the world. Which I think goes a little bit to what you and I were talking about a little bit in preparation for this, which is there’s a lot of negative publicity out there for this channel and this industry right now. You’ve got, in the past few years, you’ve had Bill Ackman come after Herbalife hard, short selling their stock. You’ve got, that’s led to the FTC investigation into Herbalife. You’ve got the Vemma action. You then had the Herbalife settlement, you know. Now, just now there’s a documentary coming out about Herbalife and really trying to paint this industry in a bad light.
Kenny: And a lot of people think that that’s horrible, kind of doomsday-ish. I think it gives us an opportunity to up our game a little bit and really capitalize on the fact that yeah, this is negative publicity right now, but it is publicity. And if those of us who are passionate about the industry and know that there’s good stuff here can use this as an opportunity to say OK, let’s up our game a little bit more, we can really capitalize on this. And that’s what I like about what you’re providing. One of the questions I like to ask people on the podcast is, what are some of the biggest changes that you’ve seen in the industry over the past few years, and what do you think is on the horizon for the industry?
Kelly: Good question. Having been around direct selling for 35 years, you know, I remember how exciting it was when the fax machine came out and distributors could fax in their applications. And I kind of use that as a center point, thinking that was a wow. Today, we have so much at our fingertips that make being in business so much easier than what it used to be. To your point, and this is just my observation, and I’ve been watching for a long time and kind of the sad part is the industry hasn’t done a really good job making necessary changes to be credible. What I mean is, it’s still about money. It’s still about an income. And I understand that people do join the business because they want to make extra money, and that’s fine. I think it’s the ones who really exploit it and take it to a level where it’s just, it’s harming our space, and I think that’s why in Vemma’s case, you know, they were under such attack. There were great people that ran that company, and BK is a great individual. And I think he’s learned a lot, so much so that he started his new company. He’s reinventing himself. It’s interesting, he’s added Deductr as a tool so that he can focus on the business side. Just be in business for the benefit of being in business for yourself and enjoy all the benefits that come with that. I think we’ve got to focus more on that than just, you know, “overnight millionaires.” And that fixation is still out there. It’s sad. It doesn’t need to be that way, you know. This could be a really sound business model, and thankfully, I think the internet is helping to change that. Because you’re more transparent. You can’t do bad things and think you’re going to get away with it. The internet’s going to hold you accountable. People are going to find out.
So why not do it right and let it be what it’s meant to be? You know? It’s a business that anybody can get involved with, and with good practices—best practices—they can have a great experience and do amazing things and take advantage of the tax breaks and make extra income. And if they are really skilled and talented, they can make a full time business out of it. So as a wholethere’s a lot of work to still be done. But I think tools today are allowing them—the independent business owner—to be more accessible, be anywhere. It is a global model and you can feel that synergy happening out there. I think there is a shift coming. I love what’s happening with apparel. I love what Lularoe is doing. You’re seeing apparel in this space, and what they’re doing with it. I look what Younique has done in this space, and it’s working. It’s just that I think we—network marketers—as a whole have got to own it and be more responsible and watch how we interact and act in public settings and on stage and just tone it down a bit, you know? And not get carried away.
Kenny: Yeah. I appreciate that. And I think we’ll end on that note, because I think you’ve summarized it really well. I think it’s an exciting time to be in the business. I think technology, like you said, the tools that are coming out are really incredible and will help those of us who care about this space make it all the more reputable. So thank you for your time, Kelly, and we look forward to having you back in the future.
Kelly: Thanks. Good to be here. Thanks for having me.
Kenny: And that’s it for today’s episode of the MLM.com podcast. You can support us by rating us on iTunes or reaching out to us through MLM.com. We’d love to hear your feedback and the issues you would like to have addressed. Also, special thanks to Kelly for his time and expertise, and thanks to the MLM.com staff and specifically Jana Bangerter and Adam Holdaway for their production support. I’m Kenny Rawlins and look forward to you joining us next time.