A catch phrase that is often mentioned is the “80/20 rule” but rarely do people really spend time living it. This rule is phrased in different ways but most often means that 20% of your efforts result in 80% of the benefits. In a sales environment for example 20% of your clients result in 80% of revenue and the other 80% of your clients result in 20% of your revenue. Generally speaking the analogy goes is that those same 20% of clients result in using only 20% of your resources so they are way more profitable – 10x or more.
The 80/20 rule is geared at asking how do you identify and focus on those 20% of items that result in highest level of value and, in turn, minimize the 80% of things you do that result in lower value? This is easier said than done for sure.
In order to take advantage of the 80/20 rule you should take note of the following:
- Know your 20’s and 80’s: Until you know the 20 that produces the 80 you are nowhere. Start by understanding your clients’ profitability, understanding your team’s effectiveness, and understanding all else you can. Many things you don’t realize you are spending time and resources on until you focus on identifying what is generating what. It is easy to lie to yourself here.
Ask yourself if the data you have is really capturing what is needed to make the determination on identifying what is generating what. For example, are you factoring all the costs that your whole team spends servicing your clients? If you have good data to work with then the analysis becomes easy.
- Make hard decisions: Just because you identify your 20 that produces your 80 does not mean that you are willing to fire the 80% of clients that generate 20% of profits. However, following this analogy, this lets you ask questions of how you can get your 80% of clients more profitable. Some of these decisions will indeed be to fire clients. Other decisions will be to stop projects. Yet other decisions will be to cancel ongoing meetings. All of these are valid decisions. It will give you an opportunity to deploy those resources in a more effective manner.
Be careful of the 80 that eats up your resources and only gives you 20. If you know your 20’s and 80’s and make the hard decisions, you will be living the 80/20 rule and increasing the effectiveness of your organization, profitability of your clients, happiness of your employees, and much more.
Have an awesome week and remember to do something today to supercharge your success.
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