I’ve read 2 books on the 80/20 rule.
The 1st by Richard Koch (The 80/20 Principle) who co-incidentally was the first to write solely on the subject of explaining how the 80/20 rule is found everywhere in our lives and not just in business.
And the 2nd by Perry Marshall (80/20 Sales and Marketing) a successful sales consultant in the USA.
It was Koch’s book that was the catalyst for Marshall’s book but not before he started applying the 80/20 rule in his sales career which resulted in creating his consulting business which is devoted to helping business owners grow their businesses applying the lessons he learned from Koch.
You can pick up both of these (via Amazon.com) if you go to my reading list.
It was Marshall that demonstrated to me the extra income potential where a client base of 100 has the potential for you to double your fees by providing additional services to just 20 or so of those clients.
Here’s how this works.
If you have 100 clients who spend on average $1,000 per year with you, 16 would willingly spend $4,000 and 4 more would willingly spend up to $16,000 with you if given the opportunity.
The 80/20 rule virtually guarantees this.
100 clients now pay an average $1,000 per year:
Total fees: $100,000
80 Clients would continue to pay you: $80,000 (80 X $1,000)
16 Clients would willingly pay you: $64,000 (16 X $4,000)
4 Clients would willingly pay you: $64,000 (4 X $16,000)
Total fees: $208,000
Here’s why you’re not getting the extra $108,000!
You are simply not offering the services that would capture this income.
When I was in practice with my Partners I would regularly run the 80/20 rule over our billings and sure enough, give or take a few percentage points, 70-80% of our billings came from around 20-30 % of our clients.
It didn’t matter whether I did this on monthly billings, quarterly billings or annual, it would always paint the same picture.
Proof positive that 80/20 is alive and well, no matter what business you’re in.
In fact before this (and afterward) I had clients who willingly spent $15-$20,000 per year with me plus one or two who paid $30,000 or more and another who paid over $50,000 in one year.
So Practitioners, how are you going to get that 20 in 100 clients of yours to go from $20,000 annual billing to $128,000?
The solution is simple.
Package a service that you don’t already provide (but someone else does, you can bet on it) and offer it to them – first.
Alternatively – go find 108 more clients (that should be easy) who’ll also pay you $1,000 a year.
Although not a primary reason, this possibility is at the heart of why I’d like to see more Accounting Practitioners provide a simple form of business advisory service in their Practice.
Another factor is Prof. Alan Williams research on small business in Australia that revealed 62.3% fail through a lack of business/ management experience, skill and ability.
This is a statistic that every Accountant in Practice has the ability to reduce.
As an Accounting Practitioner, you already have the knowledge, and all you need now is a way of getting that knowledge to your clients in simple, easy ways.
1. You have clients who need your advice and guidance
2. You have clients who are willing to pay you for this
3. You can add 10’s of thousands in extra income to your practice
4. Your Practice will become more attractive to business owners.