| |
| |
|
Management Information |
|
|
|
Paretos Law- Your Formula For Success
A 'dirt-world' retail business I used to manage had a large turnover, a very high profit, and less than 100 lines. Early in 2001, I was contracted to manage another business. This one carried over 800 different lines, yet had a turnover of only about a sixth of the other business, and a lower profit margin. They both had a comparable amount of traffic and credibility in the market, so how can it be that the results were so different? The explanation starts with Vilfredo Pareto, an Italian economist and political sociologist who lived from 1848 to 1923. He devised the law of the 'trivial many and the critical few', better known as Pareto's Law, or the 80:20 rule. This rule says that, in many business activities, 80% of the potential value can be achieved from just 20% of the effort, and that one can spend the remaining 80% of effort for relatively little return. Old Vilfredo might have lived a century ago, but he was spot on. I've been in business a long time, and I can confirm the almost universal truth of the 80:20 rule, in many forms. - When Sales Manager of a Realty office, I had 19 sales staff working to me. About 85% of the business was written by the four top staff. - In a Consumer Electrical business I owned, around 75% of the turnover came from the the best-selling 20% of the stock. - In an eco-tourism business I managed, there were almost 40 Departments of stock. One department alone produced over 25% of the profit; the next five departments produced the next quarter of profit; the next seven another quarter, and the last twenty-five or so together only produced the last quarter of profit. The 80:20 Rule applies in almost every sphere. It's uncanny. In almost any field, 20% of the resources produce 80% of the result. It's vital to understand that the reverse is also true- things that take up 80% of your time and resources, will only produce 20% of your results. Stocks, products, services, insurance, litigation, people- the 80:20 Rule keeps coming up! Look for it and you'll find it. The universality of this principle should be a powerful guide for you in business. Find out how it applies to your enterprise, and you have the power to set the vital priorities which will mean the difference between failure, survival, and success. Take the time now to look at your business. Look at where the results are coming from, and concentrate on those areas. Look at some of these areas... - Have a product range? Have a look at how much of your profit comes from each item. Put your effort into the 20% that give you 80% of your sales- your winners. - Selling products or services? Most likely, 80% of your sales come from 20% of your customers- the ones who make the big purchases and are repeat-buyers. Cherish that 20%. - Have a sales force? Have a look at how much of your profit comes from each person. Make sure you reward and retain the 20% that are your winners. - Have an affiliate program? Find the top 5-20% who give you 80% of your income, and make sure you support, encourage and reward your winners. - Do advertising? Have a look at where the sales come from. Then identify the few ads that really pull, and the few places where you run them that really produce. Then refine your winning ads, and run them in those few places that give you the best results. - Check your web traffic logs! Which keywords are bringing you the most traffic? Which search engines? Which websites? You'll find that a small number of keywords, search engines and websites give you the lion's share of your traffic. Nurture them, and build on those strengths! Run the 80:20 Rule over YOUR business today. It will save you time, effort, money and resources, and take you further down the road to business success. Bon voyage! John Payne is the Publisher of Web Marketing Ezine and an SEO consultant. John is also the Proprietor of the 'dirt-world' business Enviro-Friendly Products.
MORE RESOURCES:
Management - Google News |
|
|
|
RELATED ARTICLES
Great Hires: Avoid Costly Mistakes Picking people for a job is like going to the store to buy apples. Before you go, you ought to know whether the apples are to be eaten fresh, make into applesauce, baked into a pie or made into juice. My Companys Leadership Sucks! Maybe it's the season or just a more buoyant job market; but lately I'm sure involved in a lot more discussions about leadership.I'm receiving more requests for help defining the key characteristics which make a great leader; and I'm hearing a lot of negative stuff from clients about their bosses. Keep Your Good Workers by Building Good Leaders A recent report from the American Hospital Association's Commission on the Workforce asked healthcare workers key questions about the performance of their front line managers. The study concluded that an employee's decision to stay with or leave an organization is primarily based on his or her relationship with an immediate supervisor. Stop Waste, Fraud and Abuse Each year, businesses write-off six percent of revenue to waste, fraud and abuse. But why would managers throw all that hard-earned money away when there is a reliable way to eliminate waste, fraud and abuse using accounting policies & procedures to create internal controls. Sending Documents Through Email? Dont Get Burned by Metadata! During a recent seminar I gave located in the suburbs of Philadelphia, I discussed something called, "metadata". When I asked whether anyone ever heard of metadata, I was confronted with blank stares. The 70% Solution: Practical Testing and Version Control "What do you mean you need to push back the launch date?" Says the CEO. Says the CFO. Dont Get Side-Tracked By The Nay-Sayers You, the Entrepreneur, are 'normally' a type-A individual. One who has little patience with the establishment ~ he or she likes to do it 'his/her way' and that's OK if you know the system and have a plan to achieve your goals. Employee Motivation - Access Their Unique Talents Your people are invaluable to you. They are the lifeblood of your business or organisation. Preparing a Budget Ok, you say, I know I need a budget, but how do I prepare one? The most common budget period is one year, but this can vary depending on whether or not your business has seasonal or cyclical fluctuations. For example if you run a Christmas decorations shop, or a costume shop your business is going to peak during certain times of the year. Why Soft Skills? The industrial age is over. Organizations still stuck in the industrial age business models are going out of business very fast. PR Still a Mystery to Some Unfortunately, there are managers who define public relations by its applications. Which explains neither its underlying strengths nor what PR is all about. DIVERSITY is a BIG word -- With A HUGE Business IMPACT Second thought! Just in case. YOU or someone you personally know may fit the following picture of success which may carry too much risk for comfort. Use QA As Your First Step To Outsourcing Quality Assurance, or QA, is often given short shrift in a software development organization, especially when budgets are tight. When debating the software development budget at one of my software companies, the CEO finally asked, "Well, do you really want to hire a QA guy, or a programmer to add features to the software?"It was a tough choice. The Myth Of Relationship Selling Revealed At Last The second you quit being the 'best deal' for your customer, he'll drop you like a hot potato. Regardless of how many lunches you've bought him or birthdays you've remembered. Delegating Responsibility Too many managers waste both time and energy performing tasks an employee could perform just as well, thereby lowering productivity while raising operating costs. The answer to the problem is easy-delegation. Supervisor-Employee Relations: Tips For Managers Supervisor-employee relations are a critical part of a work place atmosphere and promoting productivity and cohesiveness. The following tips address these issues:1. Its All About The Customers, Baby If you want to ensure a steady stream of customers in your business, you must always remember why you're in business in the first place.Sure you want to earn a decent income for yourself, but you also want to provide a useful service don't you?That second reason should take precedence over the first. Cheat Sheet; Understanding The MSDS and Your Obligations In The Workplace To Employees MSDS SHEETSMSDS stands for Material Safety Data Sheets. MSDS sheets contain nine sections. 3 Simple Things the Best Managers Do - And You Can Too! If it's so simple, why don't managers all over the globe get this right, every time? Well, because it's so simple, it seems too easy, so busy managers squeeze a lot more in, time after time. And that makes things much more complex - just the way a manager should be. Increase In-House Nursing Homes Collections The following nursing home collections report outlines 11 guidelines you can follow to increase the amount of in-house long term care collections your facility collects.1] Have A Defined Long Term Care Collection PolicyOne of the major causes of delinquent nursing home receivables is that the facility has not clearly defined to its residents/responsible parties and business office staff when the accounts are to be paid.
|
| home | site map |
| © 2006 |
