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Wes Moss - The Compound Income Effect

Monday, 7 Jul 2008 | 4:35 PM ET

By Wes Moss

Hard work alone didn’t get Linda Rabb to her six-figure salary. In fact, she worked hard all her life but never got rich at the work she did in the fast-food industry. Only after making a c

hange—finding a way to compound her income instead of just drawing a paycheck—did Linda turn her hard work into a six-figure income. Now, after only 5 years of selling supplemental insurance for Aflac, the “Steak n Shake Lady” makes well north of $150,000. What’s more, she expects to reach a point where, without working forever, she can make money each year virtually as long as she lives. I’ll explain that part later in the chapter.

Linda didn’t always have such high expectations: Most of her life she had worked hard in the food and beverage industry and was happy to just get by. Her last job, as a beverage manager, was okay. But no matter how hard she worked, she still earned the same amount: “It didn’t matter how good a job I did, I was only going to be paid X amount of dollars a year,” Linda recalls. This started to bother Linda when she reached her 50s. That’s when a sudden out-of-state relocation to be near her daughter resulted in Linda working one of the hardest jobs of her life: night manager at a Steak n Shake restaurant. It was what she called a “job of necessity,” not a dream career. In fact, most of her coworkers were there because they needed money: “People there are not in it for the laughs and giggles,” she says. But it was the best job she could find in a new state with no contacts. For 3 years she worked the night shift 60 to 70 hours a week on a hard concrete floor, earning $42,000 a year.

When Linda talks about how she was working hard and not getting ahead, she has a sense of humor about it. But it must have been an awful feeling for this smartly dressed grandmother-to-be slaving away for what she now thinks of as pocket change. She didn’t know what she was going to do, but she knew she had to come up with a plan. So Linda was ready to listen when one of the Steak n Shake regular customers made her an offer: “This gentleman kept coming in and saying if I ever wanted a career instead of a job, I should come talk to him.” So Linda went to talk with the Aflac regional sales coordinator. “I knew within 15 or 20 minutes I could do this.”

The Triple Rs
Years of working in hourly and salaried jobs had taught Linda an important lesson that is the point of this whole book: She did not just need a paycheck; instead, she needed repeatable, reoccurring revenue. For years she’d been trading her hard work for a paycheck, and it hadn’t gotten her very far. With Aflac, she’d found a company that offered the ability to set up what I call the Triple Rs: repeatable, reoccurring revenue.

First, she has to land an account (by convincing a business manager to adopt the plan on Aflac’s menu of insurance offerings). Then she presents the coverage and hopefully signs up some employees to buy it. That’s how she earns her first R: revenue, in the form of commissions. The second R, repeatable, then comes from sales through word of mouth. Sometime during the first year, at least one of the employees who signs on is likely to use his or her benefits—maybe the employee breaks his wrist or throws out his back. Bam, he gets a check from Aflac. He tells his coworkers about it, and the next time Linda goes to make her presentation at that company, more employees are likely to sign up—with no extra effort on her part. She’s selling the same product and making the same number of presentations, so each year her commission base (revenue) grows and compounds. That’s what makes her commission income repeatable. Now here’s the third R: Aflac also gives Linda reoccurring income because each time one of her customers renews his or her policy, Linda gets a commission check. Same customer, new sale each year. What’s more, Aflac is able to produce statistics to show that after a customer renews coverage, he or she is extremely likely to keep renewing the Aflac coverage indefinitely. The beauty of the three Rs is that Linda’s personal income can now compound instead of having to be replaced every year.

Here’s the kicker: After Linda is an Aflac agent for 10 years, whether she continues to work for Aflac or not, she’s vested for life in those reoccurring commissions. What a great bonus for her retirement years.

Starting from Scratch
Linda had done sales once before, selling cosmetics through multilevel marketing. We’ve all heard of these kinds of companies where you give home parties, give your sales pitch, and hopefully sell some products. But what Linda found—and so many people have this experience—was that she would have to use her profits to buy more inventory to keep doing more presentations. Even when she was the number-one seller in her area of Arkansas, it never seemed like she could get ahead selling cosmetics.

But Linda saw that selling for Aflac would be different because she wasn’t making a one-time sale and hoping the customers would come back when their lipstick ran out. Instead, she would be selling an important product to a growing group of people who would likely renew their coverage, plus she had few up-front costs: “I could become my own business owner for about $300,” Linda said. “They put everything I needed to do my business right on my doorstep, postage paid.” All she had to do was secure her state insurance license, abide by corporate policies, and work hard.

In the beginning, this was a typical week: Up at 7 a.m., out the door at 8 a.m. and sell Aflac; at 2:30 p.m., arrive at Steak n Shake, change into her uniform in the restroom, and work until midnight; from 1 a.m. to 7 a.m., sleep, and then get up and start all over. Her 2 days off from Steak n Shake—Wednesdays and Thursdays—she would sell Aflac all day long. “There was no time off.”

After 3 months of this, Linda realized that instead of giving her financial security, earning the paycheck from Steak n Shake was taking valuable time away from selling the lucrative Aflac products. “Every day I stay on that job being paid a salary, I am losing money,” Linda recalls. “I am never going to succeed at this unless I give it 150 percent.”



Underestimating Obstacles
Linda remembers that she had only $456 in the bank when she decided to quit Steak n Shake. To her, she was already ahead: monthly rent was only $350, and that left $100 for gas. There was enough food in her pantry, so she figured she would have something to eat. That’s what I call confidence. “When I decide to do something, I don’t let anything stand in my way,” Linda says.

She needed that confidence because one of the drawbacks of selling for Aflac is that it’s straight commission. That’s right, no paycheck. Even though the company gives its sales associates training and marketing materials—and a huge marketing campaign based on the Aflac duck—it doesn’t give you a paycheck. For a lot of people, that might be too much of a drawback. But for someone in Linda’s position—she had few household expenses and was willing to work long hours to get started—forgoing a paycheck and living off commissions was a smart decision.

There was another major roadblock that Linda turned into a plus: lack of contacts. Instead of starting out with a list of leads from former coworkers, family, and the usual contacts we all have in our communities, Linda was starting out with nothing. Remember, she’d moved to be near her daughter and spent all of her time working at Steak n Shake. Basically, she had no business or community contacts. That could be a huge stumbling block for a beginning salesperson, but Linda made it her strength. Not knowing anyone made her work harder: “I didn’t know anybody, so I knocked on more doors than anybody else.”
Also Linda believes in Aflac’s insurance products, which makes it easy for her to believe that she can make a living off of selling them. Early on, she saw how the insurance saved a customer of hers: a single mother who was later diagnosed with cancer. When the woman returned to work, she actually ran up to Linda and hugged her because she was so grateful she’d bought the insurance. “I have seen these policies save people’s homes,” Linda says.

Building Momentum—Simply
Linda built on a selling philosophy that she calls “Keep it simple.” She tells people what they’re buying, what coverage it gets them, and how much it costs. “That’s all I want to know when I go buy a car,” Linda reasons, so that’s how she presents it. Basically, Aflac is supplemental insurance that pays out a set amount for accidents, cancer, and sometimes even preventive care—such as mammograms. Generally, employers don’t pay for the care, but they allow Aflac representatives to come in and talk to employees to let them choose whether they want to have a payroll deduction to pay for the policy. Because Linda might only get a few chances a year to make her presentations to a company’s employees, she rehearses her sales speeches to make sure they’re easy to understand.

It paid off because Linda landed some accounts from some pretty casual conversations with people she met while she was out and about. She once got an account from a woman she met at a gas station. Linda was pumping her gas and saw a woman trip and fall down. The woman was hurt badly enough that she couldn’t drive herself to the hospital, so she and Linda sat on the curb waiting for the ambulance. When the woman—who mentioned she didn’t have health insurance—asked what Linda did for a living, she told her about Aflac. When the woman found out the insurance would pay a fixed amount out for accidents and injuries, she said, “You mean they would have paid me for this sprained knee?”

Of course, Linda went and talked to the owner of the small manufacturing company where the woman worked. She arranged a meeting with him and did her “keep it simple” presentation, which convinced him to adopt Aflac as an offering for his employees. And with the injured, uninsured coworker’s sprained knee fresh in their minds, the employees adopted it eagerly. That’s why, no matter what situation she finds herself in, Linda has a ready speech about Aflac’s products. At a moment’s notice, she can explain insurance, a topic that makes most people’s eyes glaze over when you mention it. But Linda’s enthusiasm and belief in the product and general friendliness give her a natural ability to approach people about buying insurance. “You don’t get anything that you don’t ask for,” she says. “If you want to receive, you’ve got to ask.”

Linda learned to think outside the box—so that her customers might do the same. No matter how many times she met with employers who said, “No, my employees can’t afford that,” or “My company doesn’t need that,” she let it roll off her back. She approached each meeting with an employer fresh, as if all the other "no"s hadn’t happened because she never knew which meeting would be successful.

One early success was when she approached a homebuilder, expecting to set up a meeting with his employees to maybe sell a few policies. Instead, the owner, who couldn’t afford health insurance for his employees, started asking a lot of questions. “He kept asking me about different products, and I kept going to the car to get more,” Linda remembers. When he saw the relatively low price of the Aflac premiums—which normally are paid by the employees themselves—he ended up buying the supplemental accident insurance for all his 40 employees himself. And as his business grew and he added employees, he bought more coverage.
In her first full year with Aflac, Linda earned $35,000, and in year two doubled it to $70,000. Then in her third year—even when she was laid up for 4 months with back surgery—Linda still managed to sell $352,000 in annual premiums and earn $140,000 for 8 months of work. Pretty amazing at age 57, especially considering that fewer than 3 years before she had been making less than a third of that managing a Steak n Shake!



Taking the Next Leap
If Linda’s job were only about making a sale, she probably wouldn’t be as successful as she is. Luckily, not only is she good at selling, but she keeps her hard work ethic and makes it her priority to keep her customers happy. “My job only begins when I sell a policy,” she says. “I have a responsibility to that client.” So as her business started to grow, Linda hired an assistant to work out of an office and answer customer questions and manage paperwork. The assistant works for Linda and is paid out of her commissions. “My business could not grow anymore as long as I kept that small mindset.”

After a year selling for Aflac, Linda got her foot in the door at a hospital with 7,000 employees. It was a huge opportunity, and she made the most of it. She sold $100,000 in annual premiums in the first year, while the four other Aflac enrollers sold only a total of $75,000 between them. The second year she sold $200,000 to the hospital’s employees, and she still manages that account today.

Her secret, she says, is to be an early riser and “do not procrastinate.” When she counsels new sales associates, Linda tells them the following: “If you think this is the right thing to do, have enough faith in yourself that you step up and do it. So what if it doesn’t work the first time. Get up and do it again. A baby fails the first time he tries to walk. What are you going to do? Say, ‘that’s it, kid, you don’t get another chance?’”

In 2005, Linda moved up to district sales coordinator, where she still sells and services her existing accounts but also hires and trains new Aflac associates. Now she has ten active people working below her, and she gets a portion of sales of each associate in her district—in addition to the commissions on her own sales.

Now, at age 62, Linda has no financial worries. In just 5 years she went from being totally unversed about the insurance industry to making it her lifeblood. Everywhere she goes, Linda wears a crystal duck broach as a symbol of the Aflac Corp. “I get comments on that duck,” Linda says. It starts conversations in line at fast-food restaurants, helps her sell, and also gives her a constant reminder of her lucrative career—built on hard work and the power of compound income.

Wes’s Worry Less Tip - Enough is enough!

We work hard on our careers, and we sometimes worry whether we’ve made mistakes or done something totally wrong. It’s hard to know when to let go and just wait for the results. Linda learned that worrying about results can become crippling. Bringing up her three children, she was always worried about whether she was doing enough to set them on the right track. For the longest time she was worried what would happen to them and realized she had to let them go and let them be adults; they needed to be people who would make great decisions as well as their share of mistakes. This attitude also helps her in business; she puts her best efforts forward, but she doesn’t expect all her efforts to totally pay off perfectly. We would all worry less if we realized there’s no such thing as a nicely paved road in business—it’s always an obstacle course. If you worry, you are defeated before you walk out the door. In business we have to do our best presentations, try our best to sell our new idea or get new customers…then, we have to wait and let our efforts bear fruit.

“...after you have done all you can do—Stand”
—from St. Paul’s letter to the Ephesians 6:14

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For more Worry Less Tips, visit www.wesmoss.com.