The most powerful force in business
The infamous 80 / 20 Principle. Why do 20% of my networking strands (4Networking) give me 80% of my results? How come 80% of businesses will go bust in 5 years? How do the 20% ALWAYS survive?
Survival of the fittest
Let me just ask, how many of you have started up your business in the last 5 years? And how many of you have been in business for more than 5 years? (and who feels as if it's been 105?)
You see, it's interesting to find that in Scotland there are 296 thousand small to medium sized businesses. In 5 years time, 80 per cent of those businesses will have gone bust. Pretty sobering thought. Why do 20 per cent always survive?
That's what we're going to be looking at - the infamous 80 / 20 Principle. I'm going to give you some ideas, some strategies, some marketing tips, based on this Principle and I'll show you how you can use it in your own business.
The most powerful force in business
In any country at any period in time 20 per cent of the individuals own 80 per cent of the wealth. Have a go at searching online for the British Government's (whoever's in power today) own stats on this and you'll be amazed. Then choose any other random country. You'll find this Pareto principle is always at work. It is, in fact, more powerful than goverments.
Take a look around you right now. What do you see?
Your computer you're reading this on - you use 20 per cent of your programs 80 per cent of the time.
Your carpet: 20 per cent of the carpet receives 80 per cent of the wear.
Your mobile phone - you use 20 per cent of your contacts, 80 per cent of the time.
20 per cent of any sales force make 73 per cent of the sales. These are the superstars, they shine more brightly.
Did you go out out at the weekend? You'll like this one. 20 per cent of the beer, whisky and wine brands get 80 per cent of the sales.
Natural selection works on the basis that 80 per cent of a species will die young before they can reproduce. It's the fit 20 per cent that survive, find a mate and have offspring. Survival of the fittest. Darwin actually took his theory from business principles.
When you're outside in the car park, look around - 20 per cent of those cars cost 80 per cent of the money.
Are you beginning to see how this principle is at work everywhere? Business isn't balanced. For every 5 things, 1 will be cool, and that one cool person or thing will outshine the rest.
Awesome Basic Can Dead
So how can we use this in our business? The best place to start is with your clients.
20 per cent of your clients take up 80 per cent of your time (you know who they are). So grade your clients ABCD
A - Awesome
B - Basic
C - Can just about deal with
D - Dead
Starting at the bottom, the Dead ones, will be undealable, always complain, always need a price drop, never pay on time, they're never off the phone to you, won't listen to your advice and they'll make a scene in front of other people. Have you ever had clients like that? Get shot of them. Get rid of the troublemakers now. There is no exception to the rule. They're standing in the way of you moving forward. It's your business.
Moving up to the top, another 20 per cent of your clients give you 80 per cent of your profit. Your A-grade clients, your awesome ones, are a joy to deal with , pay on time, are keen to buy when you're upselling, they talk about your business all the time and they give you great referrals. You must keep in touch with these clients at least every 90 days (with something other than an invoice). Take care of these clients and they'll take care of you. They'll actually become your sales team.
My view is this: these clients allow me to live my life in a very exciting and cool way so I'm going to give them the best I've got.
Beautiful, fast and exciting
We all know that every sales decision is only 20 per cent logical and fully 80 per cent emotional. I'm a car nut. I love cars. I bought myself a TVR Tuscan, not because it was practical or reliable in any way, but because it's beautiful and exciting.
It's always hearts and minds. Not minds and hearts. Heart comes first.
It's often said that sales is like dating - have we all heard that? and is that a hard sell for some of us? ;-) It's emotion, excitement, belief, passion and listening.
Listening is very important because only 20 per cent of the features / benefits in your sales meeting really matter to your prospect. You must find out what these are and focus on them. Because the second you start talking about a feature that your prospect isn't interested in, you've lost the sale. Focus on your prospect and you'll always come out on top.
A sense of urgency
How many times have you done a great sales presentation, you think your prospect will go ahead, you leave it a month for whatever reason, and then they won't take your call? Sound familiar? You've lost the sale. After 48 hours, 80 per cent of the emotion is gone.
So there's a sense of urgency here. The longer we defer making a decision, they less likely we are to get over the hesitation and we end up doing nothing. Really, it's now or never.
I've got a 10 day rule in my business. If a prospect doesn't go ahead within a week and a half and there is no clear objection and there's no sign of them moving along to the next step, cut them loose and move on. Don't waste resources on them.
Have a gut level determination to move and win now. Don't move at 30 miles an hour when 90 is needed to win.
Vital marketing strands
Let's move onto marketing. How can we use this in our marketing? What are the 5 or 10 marketing strands are you using right now?
Out of say 10 marketing strands, 2 or 3 are bringing us 80 per cent of our profit. Move your marketing budget from the strands that aren't performing and pour them into your high performers.
Networking is a great example. In my own business, networking strands altogether give me 31 per cent of all my business in. And I've got 5 networking groups. Testing and measuring the last couple of quarters, 4 Networking has given me 79.8 per cent of my results from my 5 networking strands. That's a perfect 80/20 relationship.
This principle really does work. Have a look at your own figures and you'll be blown away.
The time of your life
How many of you don't have enough time in the day to do every single thing you'd like to? Be honest.
20 per cent of what we do today will give us 80 per cent of our results. There are a couple of vital things that we'll do today that really matter. The rest is just distraction.
In your life , you'll spend:
100 days stuck in traffic;
half a year on social networking sites;
5 years commuting;
441 days in the pub (and why not?);
190 days arguing with our closest relatives; and
325 days complaining to customer service.
Life is 4000 weeks and we can always make more money, but we never get back our time. Once that's gone, it's gone forever. We're back to this sense of urgency. And we can only spend time on our high value activities when we've cut the low value ones. If they're not urgent and important, you've got 3 options: delegate, schedule or cut. Don't waste most of your life on these things. Move and win now.
When we start thinking of the world as 80/20 relationships, we're exempt, the rules and the bureaucracy don't apply to us and we become a lot more independent.
The whole 'everything in moderation' thing doesn't work. Average and mediocre never win. And it feels good to win, doesn't it? I think, we've waited long enough with that recession, now it's the thrill of the chase again.
Cheers and have an awesome one!
Stephen from e-flyer express