What does an Italian economist who died in 1923 have to do with your sales now? A lot! Vilfredo Pareto created the Pareto Principle, the 20/80 rule. You may have heard of this rule; however, in my experience, too few people practice it in their personal or business life.
The rule suggests that a critical few inputs produce the majority of outputs and that there are masses of inputs that have little or no real value in terms of the results you are attempting to achieve. Most people behave as if all things have equivalent value: All clients are equal and should be treated the same; all projects require your equal attention; and, all products deserve to be given the same consideration.
It’s simply not true. If you analyze your current business, you will likely find that there is an unequal distribution of effort and reward.
The Pareto Principle applies to your sales:
- 20% of your clients represent 80% of your revenues
- 20% of your products represent 80% of your sales
- 20% of your efforts produce 80% of your desired results
Think about this: If 20% of your customers make up 80% of your revenue, what would happen if you focused your time and energy on developing more clients with that high potential?
Suppose you had 100 clients and 20 of them represented $800,000 of your total $1 million revenue. If you could develop and groom 10 more clients just like those profitable 20, your total revenue would go to $1.2 million! That’s a $200,000 increase in business, even if you spent no time with the bottom 80% — the Marginal Clients. And if you worked with an additional 10 Profitable Clients — 40 in total — you could increase your total revenue by $600,000 without spending time on any of those Marginal Clients. If you were originally working 40 hours a week and you spent 20% of your time on Profitable Clients, that’s only one day per week. If you spent two days a week on Profitable Clients, you could increase your sales by $600,000!
Easier said than done? You bet! However, clients I’ve worked with over the years have proven it can be done and that it is well worth the initial effort. It won’t happen by accident; you need a plan. Begin today to focus on high pay-off clients, products, and activities and you’ll transform your business and your life. The slight edge pays very well.