Cutting the Cord

Diane Birch, Executive Director of BITA, considers when it’s time to free yourself from your clients

I work in business optimisation –advising companies on how they can get from their current position ‘A’, to where they want to be: ‘B’. This might mean increasing turnover, profits, engaging staff, marketing or all the above. Whatever I am working on, I use the 80/20 rule; an approach developed by an Italian Economist while he was working on his vegetable patch.

Originally known as the Pareto Principle, the 80/20 rule was developed in 1906 by economist and avid gardener, Vilfredo Pareto. Pareto noticed that 20% of his pea plants produced 80% of the crop yield. He questioned whether this would hold true across different fields, and surprisingly, it did.

Whether considering who owns land in a country (80% owned by 20% of the population), optimisation efforts in computing (80% of the errors are contained in 20% of the code), health and safety (20% of hazards are responsible for 80% of accidents), or business, the principle holds true. Keeping it in mind will help you to focus on the profit-making parts of your company and cut out the parts that are dragging you down.

My career began in yacht-building and construction with the family business. I then gained experience in retail management working with Topshop and Debenhams. I left long ago and promise I had nothing to do with their collapse! I have since worked with many different businesses as a marketing and business growth strategist, helping my clients achieve their goals. From market share, through marketing and sales, the Parate Principle is applicable to (probably) every corner of your business.

When I first start working with a new client, this principle is the first thing I tell them about. Most of the time they know it, but they either forget to apply it, or don’t realise the full impact it can have. For businesses looking to streamline their processes and maximise turnover, please note:

If you want to make more money, you need to free up your time!

When we go through client lists, it generally holds true that 20% of their clients generate around 80% of their income. I’m not suggesting that you go through your client database and drop 80% of your clients. But you should identify that top 20% and focus on them.

It can be tempting to treat all clients equally, but in this area (and others) equity is far more important. If you split your time equally between all clients, you will be spending as much time with ‘Jack’ who provides 2% of your business, as you are with ‘Sue’ who gives you 30% of your business. All those percentages add up, and you don’t want to lose anyone. But losing Sue would carry far more business impact than losing Jack. Take an honest look at the time you spend supporting different clients, and seriously consider if you’re spending your time with the right people. If you spend that extra time with Sue, will she increase her business by another 5%? The principle also works with complaints. 20% of your clients are making 80% of the complaints and extra work in your business. If someone in this 20% is also in your top 20% of spenders, then you may need to put up with them. Many of them won’t be. It is very common that when reviewing the customer list with my clients, we find that most of the complainers are in the bottom 80% of the spenders. Without fail, they are also bad at meeting payment deadlines. Why are you keeping them around?

Cut. Them. Loose!

It can be difficult for any business to consciously rid themselves of any clients. All people see is money walking out of the door. Instead, I urge my clients (and you) to reframe this action. Instead of losing a client and their money, you are gaining back 80% of the time your staff spend dealing with difficult customers. Time they can use to find new and better clients or refocusing on your ledger’s big spenders.

As a manager, business owner, CEO... your time is incredibly valuable and is a resource to your business. Making sure you spend it wisely, investing that time into the clients that fuel your business, rather than focusing on the ones that drag you down, will not only improve the bottom line. Working with positive people that are a benefit to a business will also benefit the mental health and motivation of your team. It will give them time and energy to look elsewhere for cost saving and income boosting initiatives your company needs.

With your new, streamlined client list, you can then look at other areas to apply this principle.

If you make a product, you will find that around 80% of product defects are caused by 20% of the problems in your production methods. Review these methods, focus on improving that 20%, and the overall quality of your products will increase.

You should also have your marketing team consider their actions through this lens. They should focus their attention on the top 20% of readers of email marketing, social media and other activities, rather than trying to attract everyone.

It’s important to mention that this is a general principle that holds true across many different arenas, rather than something you should live your life by. When checking your sales, you might find that 30% of customers are responsible for 75% of your income. Or that 15% of customers are responsible for 85% of complaints. But the 80/20 rule will generally hold true and will give you a starting point for investigations.

At BITA, we are hopeful for the year ahead, and it’s our belief that the business landscape won’t be as challenging as we have been told. As I write this, the rate of inflation is being officially downgraded. But this isn’t just advice for challenging

INCREASE YOUR INCOME, TIME AND MORALE BY SAYING NO TO PROBLEM CLIENTS!

times. In order to grow and protect our businesses for the future – whether looking to sell or pass on to our family –we need to make sure they are running as efficiently as possible. Go through your operations, your processes, your complaints. Talk to your staff and ask them what takes up time. Look through the results, and just keep the 80/20 in your mind while you do so.

Cutting the cords on negative relationships and clients that don’t appreciate you will help you thrive, improving staff morale and increasing your income.