Are you familiar with the Pareto Principle? It’s also known as the 80-20 rule.
Wikipedia describes it this way: The Pareto principle (also known as the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
It’s commonly observed that 80% of your sales comes from 20% of your customers. An example of this might be that a roofing contractor finds that 8/10 of his jobs are repairs that don’t pay all that much and 20% of the jobs are for new roof installs which pay a lot more.
It’s also been noticed that 80% of your challenges come from 20% of your customers (or employees).
When you think about that for a minute, which do you think you should focus on the most? See, in most businesses our efforts are distributed equally.
A lot of business leaders think that they are supposed to serve everyone who shows up and just take the good with the bad.
But if you can identify the 20% of your customers who provide 80% of your revenues and focus more on them, what would happen? What if you were to develop an avatar or profile of the 20%, and then market specifically to people like them?
What happens if you can also identify the 80% of customers who provide little to your revenues and reduce your focus on them? The way to do this is to develop systems to provide them what they need instead of YOU working with them.
I’d go one further and say that if you can identify the bottom 10% of your customers and “fire them”, you’ll see new and exciting growth in your business too.
Here’s what you should remember: This principle (or law) is happening whether you accept it or not. If you know enough about the 20% of your business that you want to pay closer attention to, you can position yourself to attract more of them.
There’s also an opportunity to disqualify customers or make them choose to work with your competitor instead of you. Think of the last customer you had that wanted to grind you for a lower price and then when you agreed to take the job at low margins, found them to be a high maintenance PITA.
Now, what if you developed an avatar of their characteristics and made it clear in your marketing that “If you’re like this, or this, or this”, I’m not interested in working with you.
I’m doing this to demonstrate for you some best practices in getting ideal customers and clients while positioning myself to only focus on attracting more ideal clients for myself.
I mentioned in passing recently that some clients are generating about $30 in revenue for every $1 invested in my services. If, for every dollar you gave me, I gave you $20 or $30 back, how many dollars would you want to shove into my hand?