The 80-20 Rule Of Business
The Pareto Principle, or 80-20 Rule, is well-known to business owners, in practice if not in theory. Simply put, a management consultant named Joseph Juran noticed that an Italian, Vilfredo Pareto, appeared to have stumbled on a fundamental rule of economics in 1896 when he published a paper on the distribution of wealth – noting that in many countries, 20% of the population owned approximately 80% of the land.
Over the years, entrepreneurs and business owners have claimed to see the same 80-20 rule emerge in many aspects of commerce; among other phenomena, it is claimed that:
- 80% of a company’s profits come from 20% of its customers
- 80% of a company’s complaints come from 20% of its customers
- 80% of a company’s sales come from 20% of its products
- 80% of a company’s sales are made by 20% of its sales staff*
All of this seems to point directly to a fairly straightforward conclusion: get rid of the 20% of clients who are time-sinks, and focus more on the others.
But consider this: when you remove the 20% who take up most of your time, someone else falls to the bottom of that barrel. And that client starts eating up your time. So you get rid of them… and the next one… and pretty soon, you have no clients left.
The reason that this simple 80-20 rule exists is because it has to. Natural phenomena are just that – natural. It is in the nature of business that some clients are harder to deal with than others. If you pick and choose your clients based on their ‘fairness’ with your time, then you’ll have to do one of two things – either charge them for every single moment (as an attorney does) or refuse to work with clients who might conceivably have substantial time requirements.
It is a constant struggle here at DogCat Marketing to make sure that the 80-20 rule doesn’t overtake the duty of care we owe to each of our clients. Like any other business, we have clients that are more demanding, and those that are less. And like many of our friends in business, we do indeed find that certain clients threaten to overwhelm us with their calls for us to go above and beyond the call of duty.
But we feel strongly that each client has something to offer beyond the pure and objective measurement of time vs. money. Some will refer us to friends and associates – perhaps those are the clients with whom we have spent more time and built a closer relationship. Some will remember us better, purely because our faces were in front of them more often, and will come back in the future. And some – well, we just like spending time with some of our clients.
The 80-20 rule seems to have an obvious solution.
But a deeper analysis suggests to us that seeing value in every one of our clients will be more successful in the long-run, from both financial and personal perspectives.
In other words, don’t worry too much if you need a little extra TLC from us when we’re working together. We won’t hold that against you.