## Introducing the 80/20 Principal

The 80/20 Principle asserts that a minority of causes, inputs or effort usually lead to a majority of the results, outputs or rewards.

Taken literally, this means that 80 percent of what you achieve in your job comes from 20 percent of the time spent.

This implies that:

• 80% of your sales will come from 20% of your products.
• 80% of your problems will come from 20% of the people

## 80/20 Principle: Double Sales, Triple Profits

Example increasing sales:

Assumption:

Current sales: \$100,000 of products

Metrics applied:

• Marketing responders: 1% of the people you contact express interest = 5,000 responders.
• Average purchase = \$50 per buyer.
• Repeat purchase average 4 times a year = \$200 per buyer.
• Total purchases for 500 buyers = \$100,000 in sales.

Results for increasing each step by 20%:

• Marketing responders: 1.2% success rate = 6000 responders.
• Average purchase (increased by 20%) = \$60.
• Repeat purchase average moves to 4.8 times per year = \$288.
• Total purchases for 720 buyers = \$207,360 in sales.

SALES HAVE MORE THAN DOUBLED.

It is likely that such small incremental improvements will not require a great deal more infrastructure, leading to an even greater increase in profit.

Example now includes costs:

• Cost per \$50 sale = \$25.
• Labour and other overheads per \$50 sale = \$5.
• Profit per \$50 sale = \$20.
• 500 buyers x 4 purchases per buyer at \$20 = \$40,000 Profit.

Results after the 20% improvement drive:

• Greater quantity purchase discount from the wholesaler means:
Cost per \$50 sale = \$22.
• Labour efficiency and other overheads increases by 20%:
Labour and other overheads per \$50 sale – \$4.
• Profit per \$50 sale = \$34.
• 720 buyers x 4.8 purchases per buyer at \$34 = \$117,504 Profit.

Increase in profit:

(\$117,504-\$40,000) / \$40,000 = 193% – ALMOST 3 TIMES.

The rest of this discussion aims to show you just a few ways of making these startling improvements with the 80/20 Principle.

Greater detail on the process is available under the following headings:

Sales Person Performance:
The efforts of your sales force are going to have significant impact on your businesses profitability.

Model Their Behaviour: seek out why they are so successful and package that into a Training System.
Staff Training: identify the portion of sales staff that are most likely to improve with training.
Match Like with Like: match your 20% best sales people with your 20% best clients.
Focus Sales on Your Best Products: change the emphasis of your entire sales force to focus 20% of their time on the 20% of products that are your most profitable.
Manage Geography: put together a national sales team of your top 20% of sales people and match them up with the top 20% of your clients.
Tune Your Sales Channels: your sales force may be servicing all clients with equal emphasis and methods.
Reawaken Clients: the fact that a client is not buying a great deal from you does not necessarily mean that they can’t and won’t buy more from you.

Get started now to improve Productivity and increase Profit

## Index

The following topics are included in the 80/20 Skills Module available to Full Access Members:

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