Have you ever taken the time to understand where your revenue is actually coming from? There is clear evidence that 80% of profits are generated from 20% of customers (the 80/20 rule), this activity is rarely undertaken and this is the experience that we have from the vast majority of our customers.

The 80/20 Principle or Pareto Principle dates back to 1906 when an Italian economist, one Vilfredo Pareto, observed that 80% of the land in Italy was owned by 20% of the population. We can sum up the 80/20 principle for many events, roughly 80% of the effects come from 20% of the causes. Understanding how this works within your business could have a profound effect on how you do business and in turn make more money.

For a business owner the 80/20 Principle means:

  • 80% of your sales go to just 20% of your customers
  • 80% of your profits come from 20% of your products/service
  • And the worst 20% of your customers give you the most hassle

So if we know all of the above, what do you do as a business owner to ensure that you maximise your time and effort to get the most out of your key accounts. Think about it when did you last focus your efforts on your key accounts?

So one suggestion would be to do the following:

  • Focus your efforts on the customers and clients who do the most with you. These people are the ones who deserve your time and attention.

This will have a profound effect on your sales and marketing efforts. Think about other areas to apply the 80/20 principle:

  • Forecasting
  • Finance
  • Managing employees
  • Sales
  • Customer Service
  • Your tasks

Its up to you how far you want to go with this but if you do take action you'll be better prepared to eliminate waste and, therefore, increase your efficiency and profitability in the future.

Good Luck!

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