As entrepreneurs, we typically know where our strengths and weaknesses lie—and we often figure them out before, or soon after, beginning our journeys as leaders and small business owners.
The path of entrepreneurship is a crucible of sorts. It challenges us in ways that make our weaknesses more apparent and our strengths even clearer. Yet, while learning and adapting to your company’s growth is part of becoming a veteran of small business ownership, one area we at Evolution have seen businesses struggle with over the years is how they view—and serve—their customers.
As a business owner, you already know that your customers are your company’s bread and butter. It isn’t a new concept by any means; yet, when you begin dissecting what customers are having a real impact on the success of your business, you start seeing the disparity between each customer’s portion.
This brings us to the Pareto principle, which is sometimes referred to as the 80-20 rule or the law of the vital few.
In business, the Pareto principle has come to mean that 80% of your sales come from 20% of your clients, and has been demonstrated to be true countless times in a variety of businesses across the globe. Knowing this, two questions then come to mind:
And the solutions are actually quite simple.
When you begin putting your attention on the top 20% of your clients, it’s hard not to feel like you’re neglecting the other 80%. But as an article from Entrepreneur points out:
We are all conditioned to always respond to the stimulus around us. So if you obey the 80/20 rule, you are going always to feel as though you are ignoring something—because you are… But all customers are not equal. Far from it. Some earn you an amazingly disproportionate amount of money, many make you a little bit of money, and some even waste your time. With the last group, you lose money selling anything to them at all.
You’d probably be surprised how quickly you can make extra time for your top 20% by simply phasing out the 10-20% of the clients who demand too much time and energy from your organization with little payoff. While it may be difficult to slowly (or quickly) cut ties with any customers, doing so will shift your company’s resources from putting out fires to improving valuable connections.
Really, the best way to look at it is this: if 20% of your clients are paying 80% of your operating costs, then shouldn’t they deserve this same share of your attention?
During an episode of The Second Stage, we spoke with investment banker and author of “Pitch Anything: An Innovative Method for Presenting, Persuading and Winning the Deal” Mr. Oren Klaff on the subject of pitching—and closing—these types of clients.
Contrary to the way most business owners and sales teams practice, Mr. Klaff gives a unique perspective on how to structure a pitch in order to take a high status position and let the buyer qualify themselves as a customer. Pairing both psychology and sales tactics, Mr. Klaff discussed the S.T.R.O.N.G. method he developed:
Set the frame. Tell the story. Reveal intrigue. Offer a prize. Nail a hookpoint. Get the deal. And those are the phases you have to go through in order to get somebody to buy what it is you have.
According to Mr. Klaff, the process has been proven to be extraordinarily successful in getting customers to analyze their own eligibility for doing business, and often leads to a sale instead of a brush-off.
Ultimately, the challenge is using this type of sales tactic on the right kinds of customers. But if you already know who your top 20% is, and can identify other potential customers with the same makeup as this elite class of high-yield clients, your sales and profits will only increase.
If you’d like to learn how to implement the S.T.R.O.N.G. sales method in your organization, be sure to sign up for the free class available on Mr. Klaff’s website.
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