I met with the VP of Sales today and after some banter we started to look at specific key accounts as well as; competition, industry terms, margins, discounts and all the basics. In my territory it looks like the 80/20 rule (The Pareto principle) will hold true, however the 20% that brings in the 80% of the business could be maxed out and it doesn’t look like I can significantly grow that portion of the business.
The VP’s recommendation was to attack the 80% that has been ignored for the past 4 years if I am to look for growth.
The 80/20 rule is so simple to understand that when it’s challenged as Chris Anderson did in The Long Tail “The 80/20 rule is one of those phrases that means pretty much whatever you want it to mean” it can open a much bigger discussion. He has a great chapter on it… be sure to read the book.
Chris goes on to talk about how the 80 and the 20 don’t have to add up to 100 because they are talking about two different values however the 80/20 looks and sounds nice and it’s what we know. In reality your business might get 80% of it’s revenue from 40% of your clients or 90/10… 80/20 has just stuck with us.
Tim Ferris talks about how he has a 95/5 rule and focused only on the 5% of customers that brought him business and ignoring the rest.
The more I thought about what the percentages are and who to target… the more I lost focus. I now see the 80/20 rule not as absolutes I need to follow but as a guideline that a minority of customers will represent a majority of sales. What I do need to do it make sure I know how to manage the minority and the majority.
First 90 Days of Outside Sales 