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May 6th, 2017 Share: Share on Twitter Share on Facebook Share on LinkedIn

Find the One Percent

You have heard of the Pareto principle (the 80/20 rule): 80 percent of the effects come from 20 percent of the causes.

  • 80% of your revenue comes from 20% of your customers
  • 80% of your work results come from 20% of your activities (the remaining 80% are you emailing and checking social media… ;))
  • 80% of the core functionality comes from 20% of your code
  • and so on…

When you talk to (good) sales people, they will let you in on an even more staggering secret: their top 1% of clients often generate more than half their revenue. The Pareto principle already hints at the fact that effect/cause relationships are a power law and not linear. Looking more closely you often find that the curve is strongly concentrated to the far left with a steep drop and a long tail.

The first time I learned this in business was at eBay where we had a massively disproportionate amount of revenue coming in from a fairly small amount of sellers. Guess what we did with these sellers? We pampered them. And we worked hard to grow the next tier below to those levels — whilst not spending all too much energy on the 95% of sellers who contributed relatively small amounts to our bottom line.

As you are building your business and in case you have a variable revenue model, truly understand the relationship between your top clients and your revenue bottom line and focus, focus, focus on what moves the needle. This can be painful as it often means you have to ignore many, many opportunities or make conscious decisions to treat people differently depending on where they are on the curve. But the long-term success of your business might just depend on it.

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