Newsletter #5: The 20 Rule

Many people commented on the vision board concept and shared stories of their own vision board experiences, their visions and dreams. I had one person share a challenge which was more of a challenge to me to write a book on a certain theme, but that wasn’t the idea of asking you for your challenges. I’m not bold enough to play challenge-roulette where I say Throw it at me, and I take on whatever people suggest. The idea of the Business Challenge is that the most useful learning comes from asking questions, not being overloaded with content. It’s surprising how much unused knowledge you carry around with you in your head. It’s in finding the application of the knowledge that it makes it useful information.

You’re one of over 3000 people reading this newsletter every week. If it means something to you, please forward this on.

Going Public

On Thursday 5th November, I was invited to be part of the panel at the GIBS Entrepreneurship Club where I shared some thoughts on what it’s like to be an entrepreneur. It’s like asking a woman what it’s like to be a woman. If you don’t know anything else, what have you got to compare it to? Except, maybe for Bruce/Caitlin Jenna.

I really felt for Brian Habannah in Friday’s Bronze final at the Rugby World Cup. One score away from making a new world record, and every opportunity he had just didn’t work out for him.

It’s a bit like that in business. When you try too hard to make something work, it’s that extra pressure that makes your efforts fall apart. People try desperately to come up with that lifeline, the blockbuster product that’s going to make their fortune instead of concentrating on doing the little things right one step at a time to keep your existing customers smiling.

The 20 Rule

No – you didn’t read the heading wrong. In 1896, Vilifredo Pereto noticed that 80% of his peas came from 20% of his pods and what we know today as the Pareto Principle or the 80/20 Rule came into being. We also ended up with frozen peas, but that’s not part of this story. The notion that 80% of your income comes from 20% of your customers, or 80% of your meaningful work comes from the application of only 20% of your efforts has come to be a business mantra that causes people to rush back to the data to discover which 20% of their customers are responsible for wasting 80% of their time. I hold an alternative view to this principle, which I call the 20 Rule.

Tim Ferris (author of The 4 Hour Work Week) proposes that you’re wasting 80% of your time chasing the needs of only 20% of customers, and you should “fire” non-productive customers to free up more of your productive time, then you might well be missing out on some valuable opportunities. I built 2 very successful businesses catering very specifically for the needs of the 20% that the Pareto Principle suggests you weed out.

One of the dangers of the 80/20 Rule, particularly for business owners, or if you’re a manager, for achieving your business revenue and targets, is that if 80% of your revenue comes from 20% of your customers, what happens if you lose one of those big customers? Each one of those makes a significant impact on your revenue. On the other hand, losing one of the 80% that contributes only 20% of your revenue makes a much smaller dent. Not that we want to lose customers, but it is a reality, especially of small business. The smaller your business, the bigger your vulnerability to lost business.

Becoming very efficient at servicing the needs of the 80% has shown very successful results for both of my businesses. In one instance, it resulted in bulletproof systems that allowed me to expand the business from 20 customers and 600 transactions pm to over 100 customers and over 6000 transactions pm without making a significant impact on the man hours needed to service the additional load. It also means that if I lose one customer, I don’t get pressured into making handling errors like Brian did on Friday when he was chasing down the world record.

The Mantra
How did I get this right? Some call it Systems Engineering. Some call it Process mapping. I call it my mantra. The constant voice in my head reminding me how I don’t like to work. So the question I’m always asking myself is “how can I work less, serve more customers, and at the same time, give them (all my customers, not just 20% of them) a better service.” This leads to a relentless focus mainly on the 20% of customers who account for 80% of my workload. Constantly making processes more efficient results in a more reliable, consistent and predictable service for my customers. Every request or a problem raised by a customer gives me the opportunity to add value to the 20% of customers who are responsible for taking up 80% of my time. Reducing the time it takes for every deliverable, no matter how big or small the time saving, and eliminating possible future errors, may take me 10 times longer to resolve one issue, but in doing so, I’ve made it possible to resolve the same problem, or deliver the same service to all my other customers. I’ve created robustness in the business adding consistency to the way the problem is dealt with in future, ensuring the same predictable customer experience. It also builds standardization into the business which produces consistency.

Effectively, I’ve moved repetitive and time-consuming tasks from the 80% of my efforts side of the Pareto equation to the 20% side, leaving more time to apply the same exercise to the next and the next issue no matter how big or small. Or to write books. Or to work on the vision board.

The 80-20 Rule in Practice
As I finished writing this article at a coffee shop, I laughed when I signed the bill – take a look at what the bill came to – he’s everywhere, even at the Mugg & Bean!

Something for you

Tim Ferris (The 4-Hour Work Week) suggests that you read before going to bed. He suggests fiction to set your mind adrift before you go to sleep. I fully agree. So here’s some fiction that comes highly recommended.

If you’ve enjoyed these newsletters, you’re sure to enjoy the novels I’ve written. Christmas is on its way, so here’s something for your Christmas holiday reading list, your gift list, or your collection of great books that you have to recommend to your friends, your spouse’s book club, and even grandma’s Thursday Brandy club.

I’ve bundled Lost Soul and Porter’s Rule in Softcover together for this week only. The regular price for the bundle is R 448. Order your bundle now and save R89. Bundle price is R339, (plus local delivery of R35 anywhere in SA) delivered to your door. To order, simply click here, press Send, and I’ll get the details from you in a separate email. The promotion ends just after my birthday, which gives you until 15th November to place your order. You can send me expensive bottles of whiskey on November 9th.

Take care, and all the best

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