Using the 80/20 Rule to Succeed at Business

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One of the most difficult aspects of being an entrepreneur, especially if you are a solopreneur (that’s a business owner doing every aspect of running the business), is working with customers.

You have to constantly be thinking about

  • getting new customers (lead generation)
  • getting paid by your customers (closing the deal and executing the project)
  • getting return business (providing great customer service by building and maintaining a great relationship with your customer)

Over the many years of starting, growing, and operating Beefy Marketing, I have discovered there are three basic types of customers, especially with service-based companies. They are Lead Generators, Money Makers, and Lesson Teachers.

Lead Generators

These are the customers that you might not make a lot of money from, but they love your work (and probably the relationship they have with you) and they constantly refer people to you. I can easily think of the Lead Generators I have in my company. I could list them by name (but I won’t). I am purposeful with the time I invest in them because I know they are always investing in my business.

Money Makers

This one doesn’t really require much explanation, but I’ll state the obvious. Your money-makers are the customers that make. you. some. money.  They might never refer a single person to you (and not because they don’t love you) but they pay your bills, either as big, one-time clients, or as ongoing clients who provide you small, but consistent income.

Lesson Teachers

Ah, the lesson teachers. They typically don’t generate many (if any) leads; you make very little money from them; but you sure seem to spend a whole lot of your time with them. I call them the Lesson Teachers because usually the lessons I learn from them are usually learned the hard way.

So why is categorizing our customers into these three roles important to our success? Easy.

The Pareto Principle

The “Pareto Principle,” also known as the 80–20 rule, the law of the vital few, and the principle of factor scarcity, states that 80% of the effects come from 20% of the causes.

According to Wikipedia “Business management consultant, Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906, that 80% of the land in Italy was owned by 20% of the population.”

This principle is important to us as we think about our customers, because many of us end up spending 80% of our time with people who net us 20% (or less) of our annual income, aka the Lesson Teachers.

It is important to remember to spend your time and energy with the people in your business that help it grow and make it enjoyable without completely forsaking that other 20%. Here are five ways I manage my Lesson Teachers.

5 Positive Ways to Handle the Lesson Teachers

  • Be clear about your boundaries up front.
    This includes the scope of your project, all deadlines, payment schedules, etc. Leave nothing to question. One way to handle this is through the use of a project management system like Basecamp.
  • Be positive in the way you handle their concerns/complaints.
    Have your client send any concerns or complaints through Basecamp or email. Validate their concerns and keep all correspondence electronic whenever possible.
  • Be respectful, but firm when conflict arises.
    Always refer back to the boundaries you set up in the beginning.
  • Be okay to let them go as a client.
    Sometimes things don’t work out. Don’t spend more than 20% of your time trying to work with a client who isn’t going to produce more than 20% of your income.

The Beef

If you want to succeed in business, you have to make the most of your time. If you’re wasting your time, you’re wasting your money. Be hyper-focused on the positive 80/20 clients in your business and make the most of your time and resources there.

Andrew Brockenbush

Andrew Brockenbush

CEO of Beefy Marketing & Host of the Business Growth Hacks Podcast

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