Almost everyone has heard of, if not experienced, the 80/20 Rule, such as 20% of the employees contribute 80% of the output or 20% of the customer portfolio contributes 80% of the revenue. In the case of sales, many companies do derive the majority of their sales revenue from a handful of customers and tend to focus their efforts on satisfying the needs of those customers. In business, however, it’s not as important how much you bring in (revenue) as it is in how much you keep (profit).
Some companies have no idea who their most profitable customers are, because they don’t have the financial software, the correct cost basis, or the means of tracking all the costs to service a given customer. The largest customers are likely to be the most demanding and for good reason. They believe their status gives them the right to the best service and lowest cost a company can offer. How do these demands impact the bottom-line?
Instead of or in addition to calculating the sales revenue or even gross margin, what is the return on investment (ROI) for each client? The customer mix that applied to an initial 80/20 Rule for revenue may fall short for ROI. Better to measure and manage your strategic relationships so you know they are valuable assets.
About the Author: Sandra Dillon is a professional coach with an extensive background in leadership and business coaching. She coaches individuals and businesses as well as designs and facilitates workshops. She has a passion to help people be the best versions of themselves. You can learn more about Sandra or engage her as your coach by reaching out to her at firstname.lastname@example.org or by visiting her website at www.shinecrossings.com