The Fastest Way to Improve Your Profitability

You probably know a so-called “80/20 rule. It sounds like this:

• 80% of sales come from 20% of customers.
• 80% of your revenue is generated by 20% of your clients.
• 80% of donations are made by 20% of the donors.
• 80% of sales are generated by 20% of the businesses.
• 80% of your income is produced by 20% of your activities.

The reason for this is rather obvious. About 20% of people is doing about 80% of the work and is generating 80% of the wealth. The rest is riding the wagon. The majority of the population doesn’t have the energy to start the business. People feel happy enough collecting a paycheck every month, doing as little as possible to earn it.

This golden rule works when speaking about the charity. The 20% of the population are givers, the rest 80% are takers. To be more precise this rule sounds more like “90/10” which actually transforms in a “30/60/10” rule. Let me explain. The 10% are the true producers and givers. 60% are happy to ride in the wagon, but will help once in a while. And the rest 30% of the population actually hinder progress.

Reasoning from this, we can formulate that the number one mistake all businesses make is to pay no attention to the 10% of clients who provide 90% of your revenue. They are focusing on the unprofitable rest.

Don’t take your best customers for granted. Don’t ever get lazy with the 10% of your customers because they are profitable. Try not to invest (at least not so much) invest efforts and resources to make the 90% of your “dead-weigh” customers profitable. Don’t make them the focus of your marketing. That will be a fatal mistake. Analyze thoroughly all your customers and cut immediately the 30% of the dead weight, those who are costing you money, instead of being profitable.