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Posted by: Charles P Myrick CPA Posted on: Oct 18 2014 Posted in: bookkeeping services

Use the 80-20 Rule to Improve Your Business ROI

Understanding who your customers are and what they want is essential for growing your business ROI.  For example, can you say which of your customers are the most profitable?  In most businesses, a simple but undeniable axiom exists: 80% of your profits come from just 20% of your clients.  See how this vital rule applies to other categories of customers as well.

Who are your most profitable customers?

Identifying which clients are your most lucrative is worth the effort. Some clients contribute to your profits whereas others squander your time and resources. Identifying the top 20% of your customers allows you to service those customers with a laser-like focus and grow your business.  Once you understand who your “20% customers” are, you can give them the extra attention they truly deserve. You have time to provide the follow-up services needed to make sure their current and future needs are being addressed.

Who are your quick paying repeat customers?

At the end of the day, it isn’t always just profits that serve to make a client valuable.  While the 80-20 rule is of critical importance, clients who frequently order  and quickly pay provide your business with an all-important degree of stability. These clients are invaluable, but in a different way than your “20% customers.”  Finding out who your consistent and quick paying repeat clients are and then making sure that they are well served is certainly worth your time.

Who are your unsatisfied customers?

Addressing complaints and problems serves to place the 80-20 rule in a new light. Dealing with consistent levels of complaints and problems can be a drain on resources and leave staff members stressed out. Quite often, 80% of your problems, complaints and issues will also come from 20% or even fewer of your customers. Being able to identify those customers will save you money, time and potentially a great deal of hassle. There are different ways to address dealing with clients, ranging from changing your pricing structure so that you are compensated for the extra labor to changing how you do business. In some situations, it may be necessary to inform clients that you just don’t have the resources necessary to meet their particular requirements. Then remove them from the list of those you regularly service.

The answers to how your business can best utilize this rule to improve your return on investment reside in your numbers. A seasoned and experienced business accounting services firm can provide you with the insight you need to make the most out of the 80-20 rule. Contact Myrick CPA for customized financial management solutions.

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