Dave Oetken, Director of Business Advising for GLI’s ENTERPRISECORP, delivers detailed, personalized guidance to local businesses who want to generate new growth. Below, Dave examines the “80/20” rule of business, and offers insights on how your company can successfully enlarge its customer base beyond that 20 percent:
Recently, experiences with clients have caused me to rethink the old 80/20 rule. This rule states that 80 percent of a company’s revenue comes from 20 percent of its customers. As a result, smart business leaders focus most of their time and company resources toward this segment. And, while it can be a good business practice, it can also become a dangerous habit.
Case in point: a local company did increasing business with a large manufacturer to the extent that 90 percent of its revenues came from that one customer. As you can guess, when the customer decided it could buy cheaper elsewhere, it put the local company out of business, costing the community 67 jobs.
In today’s competitive environment, the 80/20 rule can sometimes be cause for alarm, especially if most of the 80 percent is coming from a small number of customers. read more...