You’ve heard of the 80-20 rule, right? Ask a business owner what the 80-20 rule is and he or she will tell you 80% of the sales come from 20% of the customers. The opposite side of that equation is also true, 80% of your customers account for only 20% of your sales.
Let’s look at some more 80-20 examples that, for the most part, hold true:
80% of the wealth in this country is held by 20% of the population.
80% of your results are produced by 20% of your efforts.
80% of your time on the phone is spent with 20% of your acquaintances.
80% of the population resides in 20% of the cities.
80% of your warehouse space will be taken up by 20% of your stock.
80% of your sales volume will come from 20% of your sales staff.
And 20% of your sales staff will cause 80% of your problems.
You’ve also heard that about 80% of all businesses fail within the first two years. Roughly 90% fail within the first five years. But there is a silver lining in that dark cloud observation. 90% of the business owners who – know what they are doing, know their customers and why those customers do business with them, have a good understanding of the importance of strong marketing and advertising, and know how to create customers – will still be around five years from now.
These same successful small businesses will still be busy growing their businesses and enjoying the fruits of their labor – too busy to visit the graveyards of the once-upon-a-time competitors. It’s funny, in a twisted way, but most of these failed businesses didn’t die. They committed suicide. Not by a knife, gun, or pills…but by one of many other equally lethal methods.
Some businesses keel over as a result of fear. When they utter the phrase, “Times are tough and we can’t afford to spend money on advertising.”…you can almost count the days until you read the obituary (this usually appears the week following their big, gargantuous, extravaganza, “Going Out Of Business Sale”). Yeah, how’s that ‘saving money’ thing working for you? So your good customers and potential customers will somehow keep you in mind when it’s time to buy, even though you don’t ask for their business? Look, you can’t call it a party if you don’t invite people to come. And – you can’t save your way to a fortune.
Other businesses succumb from lack of profits. They just run out of gas. They think they have to play the low price game to compete with the big box stores. They mistakenly think that the customer is interested only in the lowest price. When, in fact, the consumer is most always interested in your answer to the question, “What do I get for my money?”
Tell me about your services. Tell me why you are worth what you charge. I want value for my money. I understand that lowest price often ends up being the most costly. I understand the concept of you get what you pay for. If you create enough value in the mind of the consumer, your higher price will be perceived as the true bargain.
Most other business suicides are a result of stubbornness, an unwillingness to change and adapt to new and proven concepts. You’ve met the kind. Big talker. Big swagger. Expert at everything. Or, as a dear friend of mine used to say, “He was all hat and no cattle.” They would rather go down in flames than ask others for help. Too proud to consult a real expert. Too stupid to learn the truth.
Remember this…successful business people are not smarter than you. They’re not better than you. Typically, they are ordinary people who find a way to do it right. They find a way to out-compete the competition. They find a weakness in their competitor and make it a turn it inside out to become a strength in their own business. They find a way to communicate their story and get the word out to consumers who are most likely to become their best, most profitable customers. They find a way to coddle each and every customer and treat each one as if they were the most important customer on the face of the earth. They’re always open to new ideas and ways to make their business competition-proof.
Also remember this. It’s ten times easier to sell a satisfied customer than a new one. And it’s fifteen times easier to sell a referral from a satisfied customer than it is to sell the first-timer.
And finally, keep in mind it doesn’t take a huge effort to beat your competition. Spend just 15 minutes every day learning how to make your business more productive. Just 15 minutes a day will make you a world-class business owner in no time at all. Just 15 minutes a day spent working on your business will be about 12 minutes more than 80% of your competitors spend. How’s that for yet another 80-20 rule?
To your success!
Van is vice president of Marketing Firepower with decades of experience in helping small business succeed through the effective use of advertising.
