Hit like a ton of bricks.
Yes -- to think we waste 96% of our ‘stuff’ (read: resources) is a shot in the forehead.
But where do we make waste as entrepreneurs?
According to business guru and author Perry Marshall -- everywhere.
Marshall first came into my crosshairs years ago with his throne status of Google Adwords King. However, his depth of wisdom leapt ten-fold with his revelation to me last year that “the number one skill needed in the 21st century for entrepreneurs is ‘opportunity discernment’.”
But lest you glance over this with a brush-off, I implore you take pause and soak it in again:
“The number one skill you need as an entrepreneur is ‘opportunity discernment’.”
Think about it for a minute: you and I are crushed to death under an avalanche of information and opportunity overload. Never in the history of man has there been so much noise with so many choices. Each opportunity screams louder than the next. Each ‘shiny object’ pulls us in 97 different directions.
So how do we deal with the onslaught? Two powerful steps for you to apply today:
Step 1: Wake up to realize if we focus primarily on the top 20% most important customers, opportunities and key activities, it will potentially yield 80% of our results. (Take it one step further -- focus on the top 4% and our yield is worth as much as 64% -- which I’ll explain in a minute.)
Step 2: Make a decision right now to vastly improve our ability to ‘discern’ (read: make wise choices) on where (The 20% and 4% Factor) to focus our time, money and energy.
In his recently released book entitled ‘80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More’, Marshall gives at least 34 vital tips you can apply to “what actually works in sales, marketing, lead generation, publicity and e-commerce” for your business.
Marshall’s book, based in part on Richard Koch’s landmark book entitled ‘The 80/20 Principle’, “is about the myriad ways he began to apply 80/20 in every aspect of sales and marketing.”
And of course both books expand on Italian economist Vilfredo Pareto’s insight into income and wealth distribution, better known as the ‘Pareto Principle’.
But what about this 4% factor thing and why should you care?
Let me spell it out.
If the proven ‘Pareto Principle’ formula states that 20% of your customers produce 80% of the revenue for your business, what if you drill down further?
Here’s what Marshall discovered as described by Koch: “The point Perry (Marshall) makes is that 20 percent of the 20 percent of customers are ultra-valuable… Four percent of (your) customers may account, or could account, for 64 percent of (your) profits”.
Yes -- 20% of the 20% may equal your primary opportunity for results.
Koch describes further;
“Marshall’s point is if you know who these customers are and provide them with what they really want, all you have to do is double sales to them and you have another 64% of profits. But very often these sales are not consummated simply because you don’t have the very expensive products these ultra-valuable customers really want to buy.”
Marshall boldly lays out in his book what he refers to as the ‘$2,700 Espresso Machine Principle’;
“Starbucks has its $1.40 Tall Coffee of the Day, but it also offers its $2,700 espresso machine. Hotels have $1,200-per-night suites on the top floor. Airlines have red carpet clubs and international flights offering $10,000 first class seats and $20,000 luxury sleeping pods. All are aimed to capture highly profitable revenue from the top percentage of customers.”
No small revelation for you to brush off in regards to your customers.
And the other nugget Marshall uncovered? This rule applies to everything. It’s not just about segmenting out your customer list to find the top 4%. No -- you need to apply this same principle to other areas as well.
For example, I personally watch many entrepreneurs fall hard because they focus on the wrong activities. Not knowing what you’re supposed to be working on each day -- and actually working on the wrong things -- to move your business forward is akin to throwing me the keys to your business and walking away. Because unless you take full account and understand how valuable this principle is, you’re toast.
If you fail in your ability to apply the rules of ‘opportunity discernment’, 80/20 and The 4% Factor in your life as an entrepreneur, you’re wasting 96% of your valuable resources.
(Hungry for more wisdom and examples of how to turn your business around with the 80/20 rule and The 4% Factor? Grab the 230-page book. Marshall sent me one digitally to look at and then I clicked over to Amazon and bought myself the physical version above.)
NOTE: If you don't know me, I'm Eric. Husband, father & life-long entrepreneur.
If you're an entrepreneur -- let's connect right here -- right now.
Seriously. Here's a proven formula:
Your Wisdom + My Wisdom = More Success
(You can also find me hanging out at Mighty Wise Media; on Google+ , LinkedIn or Twitter @MightyWiseMedia.)
