What does that mean, you ask? It’s a concept and the foundation of growing your distributorship’s revenue.
Most of the people who read this growing idea will be familiar with the Pareto Principal, or as it is more popularly called, the 80/20 Rule. Few, if any, have ever put a pencil to it. If they had, and applied what they learned, they would likely have understood how to achieve substantial revenue growth.
In order for the 80/20 Rule to function, you must have hundreds of items or inputs to measure. This makes it a tool that equipment distributors can use to grow their revenue, and here’s why.
Below, I’m going to show you why this is true, but here is the critical take-away. The top, or most valuable 20% of your customers, generate at least $16 of annual sales revenue for every $1 generated by the remaining 80% of your customers. Here is an added insight–they also tend to buy at least 16 times more equipment then your customers in the bottom 80%.
To achieve substantial revenue growth requires more than just this fundamental piece of information, but it is the key. Without this key and its proper application, you will never achieve the revenue growth that you are otherwise capable of attaining.
Here is part 1 of the proof:
Obviously, these numbers do not reflect a real distributorship. I choose them to simplify the proof. However, when you meet with us, we give you real numbers using your data.
Everything about the “standard” is as you’d expect. The Sales Revenue Ratio is 4 to 1. Now let’s take a look at what I choose to call The Revised 80/20 Rule.
The difference here is that we are measuring the revenue per customer, rather than by group. I suspect that this illustration casts the economic value of your customers in an entirely different light.
I hope it does because it’s the key to:
- Increasing revenue
- Delivering more qualified leads to your salespeople
- Selling more equipment
- Increasing equity in your business
- Improving your win rate
- Increasing average deal sizes
Here is something else to drive home this point. We have analyzed the sales data for dozens of distributorships and we have yet to find a revenue ratio as low as 16 to 1! Normally it is in the mid-20’s but it’s not unusual to see them in the 30’s. That’s powerful stuff if you have a passion for growing your distributorship’s revenue.
We are Growing Marketshare 365 and we are the largest provider of Unlimited Exclusive Leads to equipment distributors throughout North America. If you are ready to have a conversation about how we can collaborate with you to substantially increase your distributorship’s revenue growth, click here.
