Sales Coaching Series, Part 3: Pareto is alive and well...and lives in selling!

Richard Koch in his 80/20 (a.k.a. Pareto) Principle book describes how people who apply this rule to their lives and how they then live them, are far more productive and successful than others. 

In other words, it is a time management and thinking tool first and foremost so if one focuses one's efforts on the small number of the most important tasks, customers, activities and so on, one is far more likely to succeed than if you go after the 1000s of less important ones.


Another way of looking at this is via inputs and outputs. 20% of your inputs will account for 80% of your outputs. OK, so when we say 80/20, we don't actually mean EXACTLY 80/20. In fact, it could be anywhere in the 90/10 to 70/30 territory; however, it hovers around the 80/20 mark.

So, what does this mean for you in terms of selling and selling process. You will find that the top percentile of selling professionals, win multiples of sales and earn multiple commissions more than the average selling person in the bottom 80%.

Have you ever carried out the following exercise on your company's selling history and put them into an Excel spreadsheet? This works best when you have a mature company, and therefore a broad range of mature many clients/customers. It goes like this: 

List out all of your "sales by client" over the past 12 months; in other words, customer #1 to customer #500 and using Excel, rank them in order of size, so that the largest client is at the top and the smallest client is at the bottom. In the next column run "cumulative sales" by adding sales of customer #1 to sales of customer #2 and so on, until you reach the bottom when the last customer's sales, when added to the second last customers sales, will equal your total sales.

  • Next run a percentage of each of these customers' sales as a percentage of total sales. Then run a similar cumulative of these percentages and you will find that you can draw a line at some point when around the top 10%/20%/30% of your customers will account for 90%/80%/70% of your sales. 
  • I have seen this being a revelation for companies who, as a result, have completely changed around the way that they are working with these larger clients. I often find that they are neglecting some of these larger and more ideal clients to satisfy some of the smaller ones that can often be the most problematic; in fact, you might say that 20% of the clients cause you 80% of your challenges, so your job is to identify them and ditch them!!

The Pareto Principle is an excellent thinking tool, and this I've learned  in the context of the selling process…apply it, not just to your selling activities, but to every other part of your business and personal life that you can in order to be more productive. 

It will move you to a point where you are generating a far greater return on your investment of time, effort and resources. What you will succeed in doing is moving from managing time to managing results! 

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