Is Your Business 80/20?
You’ve no doubt heard of the 80/20 rule, otherwise known as Pareto’s Principle. The theory is that throughout life 80% of effects come from 20% causes.
It all started with Vilfredo Pareto back in 1906 who found that 20% of Italians owned 80% of the land.
The rule has been found to apply in business, 20% of your customers are responsible for 80% of your sales. The ratio might not be exact but have a look and you will probably find that it holds fairly true.
What to do about this?
Well you can go the Tim Ferriss (Author of The 4 Hour Work Week) route and sack the clients that take up too much time for too little return. Too drastic? Try these;
1. Create a clear picture of who the 20% are, ideally you want to attract more of them!
2. Find out what else they need. If they already account for 80% of your revenue it makes sense to try and increase this, they are clearly happy customers.
3. Find out what the other 80% want and create something for them. Try and capture more of your market and turn some of the 80% into loyal customers too.
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