If you have been around for a few years, you have likely heard of the Pareto Principal.
It’s the old 80/20 Rule. It was named after Vilfredo Pareto and theorizes that 80% of consequences come from 20% of the causes.
The principle is about unequal relationships. The relationship between input and output is not the same.
Pareto’s original observation was linked to the relationship of wealth and population.
Pareto noticed that 80% of the land in Italy was owned by 20% of the population. He took his new thesis on the road and noticed that it was roughly the same for every country that he visited.
Bottom line is that in life there are the haves and the have-nots.
So why am I writing about this rule that everybody knows exists?
According to Bloomberg, 8 out of 10 small businesses fail.
Surprised? I’m not. There are 2 primary reasons why this is the case – capitalization and lack of sales.
Capitalization or the equity you put into your business to get it up and running is not enough to keep it up and going until it is profitable.
I could write a book on this topic because there are so many variables when it comes to figuring out how much you really need to start a business and then keep it up and running.
Suffice it to say that just about about everyone who starts a businesses wishes they had more in the bank when they started.
The other is a lack of sales.
Yep – not enough sales!
Salespeople give up trying to close a prospect after just 2 attempts. The reality is that it takes about 7 -9 touches for a prospect to become a client or customer.
Some products and services take even longer due to their complexity and cost.
Lack of sales is a problem that is fixable with better sales training and better prospect analytics.
Sales education is non-existent in most companies. Most owners/managers have never been in sales and a great number of sales managers landed where they are because they could sell, not teach people how to sell.
The analytics part is new to a lot of people.
By tracking the actions of your sales team via CRM, you are able to determine product life cycles, itch cycles and length of sales cycles, etc.
It also lets you know who is producing and who is not.
When used correctly, the data that you can glean from your sales force is vital, especially when it’s your business’s life that is on the line. More on this topic to come.
That’s it for today.