How many clients do you have that are a real pain in the you know where?

Even though you really don’t enjoy doing business with them, you feel as though you are trapped by cash flow constraints and that you need to continue to service them.

One of the biggest learnings that most of my clients have had, is one of those universal life laws called the Pareto Principle. In 1906, an Italian economist named Vilfredo Pareto worked out that 80% of the land in Italy was owned by 20% of the population, he also observed that 20% of the pea pods in his garden contained 80% of the peas.

From these 2 relatively simple observations came his principle, which states that 20% of causes will give 80% of effects.

So how does this apply to your business?

It means that 20% of your current clients will be providing 80% of your profits (also if you are measuring the performance of your team you may discover that 20% of your team are also providing 80% of the output). The flip side of this rule is that 80% of your clients are only providing 20% of your profits, but they are also probably consuming 80% of your time, resources and energy, as well as giving you 80% of your headaches!

Now I am not saying that you stop dealing with (sack) 80% of your clients…..at least not straight away, but more importantly we need to find out who your top 20% are and confirm for yourself that they are providing the majority of the profit to your business. Once we are clear on who they are, we now need to make sure that we are giving them exactly what they need in terms of our products and service.

Once we know who those top 20% are, we need to study and understand them, to the point that we can construct a profile of what our ideal client looks like. Are they male or female, what is the size of their business/personal income, what publications do they read, what other organisations are they are part of. In other words, where do our 20% hang out in the greatest concentration. Then we are able to target our marketing and advertising in those areas. Not to mention finding the most effective way of generating referrals from our 20%, because the chances are they associate with people just like them.

Where else in your life and business can you see and take advantage of the 80/20 rule?