| There's a rule of thumb that 80% of your profits
come from 20% of your business. Is this true for your business?
As you pull together your financial summaries for the year,
it's a good time to figure out who your most profitable
customers are.
There are many techniques for this analysis. You may be
surprised by the results when you look at the data.
Whatever the technique, it's focus and follow-through that
are the most critical elements to building your business.
* Begin by ranking your customers by total $ Revenue.
* Next, sort your customers into categories of High-Medium-Low.
Use your own criteria for what's a good customer/project,
e.g., work you like, work that is a good skill fit, good
people, learning environment. Basically, work of
the type you'd like to do more frequently.
And then rank:
High = Good customer;
Medium = Has potential; or
Low = Don't enjoy, drains resources, pays slowly, isn't
worth the effort.
* Assess Profitability.
To the extent that you can identify direct costs and
support, re-sort and prioritize your clients by profitability. Does
the picture change?(If you can't match costs to projects,
you'll need to improve your accounting system.)
* Make your plan.
Now that you have a picture of which customers you enjoy
working with, and which customers/projects are profitable,
you can make a plan.
* Focus and Follow Through.
You'll want to focus on doing more business with your
existing "profitable customers", moving your other customers
along (or dropping them) and pursuing new business in
a more targeted and focused manner. And the hard part
is following through ... more on that in the next issue.
Does the 80-20 rule apply to your business?
I welcome your comments and feedback. Any topics
you'd like to see addressed?
If you have any problems receiving this newsletter or if
you would like to be removed from the mailing list, please
let us know by sending an e-mail
to JSifleet@aol.com.
Jean D. Sifleet
Attorney & CPA
P.S. This article is excerpted from the book that I'm
writing, tentatively called THE ENTREPRENEUR'S JOURNEY. Please
send me an e-mail if you'd like to be notified when it's
available.
P.P.S. This is intended as a broad overview of information
and should not be relied upon as legal advice.
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