
By Jeff Cross, executive editor, Cleanfax
In business building seminars, the topic of the Pareto principle frequently comes up as a topic of discussion.
For those who aren’t familiar with this principle, it is basically the “law of the vital few,” in that most of your income comes from a small percentage of your client base.
Joseph Juran, a business management consultant, suggested the concept and named it after Italian economist Vilfredo Pareto, who noticed more than 100 years ago that 80 percent of the land in Italy was owned by 20 percent of the population. He also noticed that 20 percent of the pea pods in his garden contained 80 percent of the peas. Good info, especially if you like peas.
Both Juran and Pareto have passed away, but their beliefs are still a mainstay in business today. Not just a concept, but a reality for most companies across the globe.
As I was reading one of my favorite news magazines recently, I came across an article that didn’t mention the Pareto principle but some statistics jumped out to me that brought it to mind.
It involved something that I do occasionally, but not nearly enough: Fly first class when traveling by air. The article said that 28 percent of all domestic and international airline revenue came from first and business class seats. But only a mere nine percent of flyers utilized those pricey seats.
The airlines have become lean and mean — there are fewer flights but the ones available are pretty full. Profits have increased because they have dramatically reduced expenses.
Think of your own client base, and the repeat customers you covet. No doubt you could look at your list and compile about 20 percent who repeat often and don’t try to negotiate your prices and have a large amount of cleaning done each time you go to their home.
What about the other 80 percent? On paper, if you were to “fire” them right now, your income would take a small dip but you would have much more time to target and obtain an “A” list clientele, those potential customers out there that have the money and want top quality service.
Now that you have noticed an irregular heartbeat beating in your neck and maybe you are short of breath with the thought of simply throwing away the vast majority of your client base, you don’t really need to do that. What you should do, though, is analyze your company and track where the money is coming from… and concentrate on increasing growth based on the numbers.
Think about this: What attracts the “A” list type of clientele? What do you do that draws them to your company? The best way to find out is to ask them.
A short survey targeted to that 20 percent who provide you with most of your income can give you a huge amount of information on what you should do next in building your business.
Many forget that the solution to business growth is right there: The client database. You can reach out to your best clientele and get their input. Consider them partners in business development.
Whatever attracted them to your company and motivates them to keep spending money with you is information you must use to keep building your business.
Jeff Cross is the executive editor of Cleanfax and an industry trainer and instructor. He can be reached at [email protected]
In business building seminars, the topic of the Pareto principle frequently comes up as a topic of discussion.
For those who aren’t familiar with this principle, it is basically the “law of the vital few,” in that most of your income comes from a small percentage of your client base.
Joseph Juran, a business management consultant, suggested the concept and named it after Italian economist Vilfredo Pareto, who noticed more than 100 years ago that 80 percent of the land in Italy was owned by 20 percent of the population. He also noticed that 20 percent of the pea pods in his garden contained 80 percent of the peas. Good info, especially if you like peas.
Both Juran and Pareto have passed away, but their beliefs are still a mainstay in business today. Not just a concept, but a reality for most companies across the globe.
As I was reading one of my favorite news magazines recently, I came across an article that didn’t mention the Pareto principle but some statistics jumped out to me that brought it to mind.
It involved something that I do occasionally, but not nearly enough: Fly first class when traveling by air. The article said that 28 percent of all domestic and international airline revenue came from first and business class seats. But only a mere nine percent of flyers utilized those pricey seats.
The airlines have become lean and mean — there are fewer flights but the ones available are pretty full. Profits have increased because they have dramatically reduced expenses.
Think of your own client base, and the repeat customers you covet. No doubt you could look at your list and compile about 20 percent who repeat often and don’t try to negotiate your prices and have a large amount of cleaning done each time you go to their home.
What about the other 80 percent? On paper, if you were to “fire” them right now, your income would take a small dip but you would have much more time to target and obtain an “A” list clientele, those potential customers out there that have the money and want top quality service.
Now that you have noticed an irregular heartbeat beating in your neck and maybe you are short of breath with the thought of simply throwing away the vast majority of your client base, you don’t really need to do that. What you should do, though, is analyze your company and track where the money is coming from… and concentrate on increasing growth based on the numbers.
Think about this: What attracts the “A” list type of clientele? What do you do that draws them to your company? The best way to find out is to ask them.
A short survey targeted to that 20 percent who provide you with most of your income can give you a huge amount of information on what you should do next in building your business.
Many forget that the solution to business growth is right there: The client database. You can reach out to your best clientele and get their input. Consider them partners in business development.
Whatever attracted them to your company and motivates them to keep spending money with you is information you must use to keep building your business.
Jeff Cross is the executive editor of Cleanfax and an industry trainer and instructor. He can be reached at [email protected]