Pareto’s Law – The Definitive Guide to Bigger, Easier Profits After you’ve heard the adage “work smarter, not harder” for the gazillionth time, you probably want to gag. Reading Timothy Ferriss’ The 4-Hour Workweek, you’ll find it again; this time, swallow the gag reflex and pay attention.
It comes in the form of Pareto’s Law, the 80/20 principle (another teaching point that’s been around the block more times than a new driver in a Mini Cooper). Never mind. You really do need to learn this principle – and put it to use – if you want to boost the bottom line and still have time for a life.
Even just the title of Ferriss’ book should be enough to nudge your imagination. What would you do with a workweek that only lasted four hours or less? If it’s really a possibility – and it is – it’s worth taking another look at something that actually works, and not just looking, but putting it to use.
Here’s how it works: Pareto says you get 80% of your results (good or bad) from 20% of your input (what you do). In business, it can look like this: 80% of your sales come from 20% of your customers. That means that you’ve got a dead weight factor of 80% among your client base. They’re requiring an inordinate amount of work, and are only producing a small portion of your revenue. Translation: not good.
How do you put this principle to use to boost your profits?
1. Track everything.
First, you’ve got to be able to know which clients are the most profitable. If you’re not keeping track of this info, start. If you’re in an MLM selling health and beauty products, you need to know which clients buy the whole anti-aging line – on the autoship plan, and which buy the occasional mascara, if you call them… after seven attempts to reach them. It works the same way for every business – product- or service-driven, from haircuts to custom-built private jets. That same 20% of your customers are easy. They know what they want. They buy it from you. They’re happy. You’d better know exactly who they are.
2. Know that 20% like you know your own dog.
You want to be able to pick these customers out of a lineup because you know them so well. What makes them such great customers? What trends do you see? How do they like to be contacted? What are you providing that compels them come back for more? How did you find them? Where can you go looking to find more just like them? By taking the time to get to know them, you can learn a lot – it’s time well spent. Essentially, by learning all about these customers, you form a blueprint for your ideal customer. With this blueprint in hand, you take the first step in designing your customer base.
3. Be picky.
When you’re new in business, you’re so grateful to have anyone come through the door that you’ll put up with a lot just in hopes of making a sale. It’s not a good precedent to set for your business, but it happens. The trick is moving away from that as quickly as possible. Given the choice, why would you gather unpleasant, high-maintenance, penny-pinching customers who tax even your best customer service person’s patience? Instead, you could assemble a group of loyal, quality-driven, appreciative clients who value what you provide and make doing business a pleasure. It’s a matter of choosing quality over quantity, at first.
4. Get into cloning.
Well, not really. But you do want to redirect your efforts from how you used to do marketing and sales – anyone with a pulse – to attracting more who fit the blueprint of your ideal customers, and by spending more time and energy on the customers you’ve got who are already ideal. You can find more of these precious gems by asking for referrals, by going where they go and doing what they do, and by doing everything you can to provide exquisite service to them.
5. Systematize it.
You’re probably not in the position to just go willy-nilly firing clients who don’t meet your dream come true blueprint. But you can definitely make sure that your new clients are the ones you choose. Set up a ranking system so you’re able to keep track of your clients and their profiles. Customize your service so you spend the bulk of your resources on the most productive clients – while still providing excellence to your B-list clients.
It’s always possible that today’s 80%-er may become tomorrow’s best client – or they may introduce you to that dream client. Regardless, your goal is to provide excellence to all clients, while actively pursuing the ones that’ll make your life easy and your business boom.
An internet business isn’t something you want to jump into without any training – but with a bare minimum of tech skills, anyone with a computer, internet access, and a hobby or interest can build a business.
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