FSB Magazine) -- When I came across the work of economist Vilfredo Pareto one evening, I had been slaving through 15-hour days, seven days a week, feeling overwhelmed. I run BrainQuicken (brainquicken.com), a six-year-old developer and distributor of sports-nutrition products in San Jose, Calif., with wholesale customers around the world. I would wake before dawn to make calls to Britain, handle business in the U.S. during the nine-to-five day, then work until near midnight phoning Japan and New Zealand.
Pareto created a formula demonstrating that 80 percent of the income in society is produced and owned by 20 percent of the population. This highly debated principle, known as Pareto's law, also applies in other situations. For instance, 80 percent of company profits typically come from 20 percent of the products and customers.
Facing certain burnout, I decided to see how Pareto's 19th-century concept applied to my company by pinpointing the sources of most of my sales - and my problems - so I could spend my time more efficiently. I quickly realized that of more than 120 wholesale customers, a mere five were bringing in 95 percent of the revenue.
In the next 24 hours, I made several simple but emotionally difficult decisions that changed my life forever. First, I decided to stop pursuing most of my customers so I could profile and duplicate the most profitable ones. I was spending most of my time working on small accounts, when the big five already ordered regularly, without any follow-up.
I put the customers in the unproductive majority on passive mode. All my complaints came from them. If they ordered, great -- let them fax in the order. If not, I would do absolutely no chasing: no phone calls, no e-mail, nothing.
I also had to abandon being busy for being productive. I came from a nine-to-five culture and had adopted that schedule without considering alternatives. I realized I could reduce my hours by limiting tasks to the critical few and cutting my work time to force myself to focus on the most important projects.
One way to keep my schedule lean was through a low-information diet. I never watch the news or buy the newspaper. I read the headlines through newspaper machines as I walk to lunch each day. My selective ignorance has never caused a single problem for me.
I also decided to avoid meetings, unless they were for making decisions. If someone proposes that I sit down with him or "set a time to talk on the phone," I ask him to e-mail an agenda to define the purpose, and I set an end time. Decisions should take 30 minutes or less.
To avoid wasting time on business e-mail, I check it only an hour each Monday. I weaned myself from logging in, starting by turning off the audible alert and looking at it twice a day, at noon and 4. Then I reduced the frequency. I never log into e-mail first thing in the morning. I complete my most important task before 11 a.m.
Reducing the number of e-mails I receive also helps. I have outsourced customer service for order tracking and returns. Because I initially handled product-related questions myself, I received more than 200 e-mails a day. Most were from customer service reps seeking permission for simple actions, such as replacing a shipment a customer hadn't received.
I decided to e-mail permission to all customer-service supervisors to resolve any problem that took less than $100 to fix without contacting me. That reduced my messages to about 20 per week. It also freed up more than 100 hours a month, customers received faster service, and returns dropped to less than 3 percent (vs. an industry average of 10 percent to 15 percent). The result? Rapid growth and higher profit margins.
To limit my e-mail obligation further, I rely on outsourced personal assistants in India to manage my in-box and handle other time wasters. The cost: just $4 to $10 an hour.
By avoiding most telephone calls, I save even more time. I use two phone numbers - one (nonurgent) office line and one (urgent) cellular one. I keep my office phone on silent mode and let it go to voicemail. A message tells callers that I check and return calls at noon and 4, directing them to my mobile phone for urgent messages. It encourages them to leave an e-mail address. If I don't immediately recognize an incoming number on my cell phone, I let the call go to voicemail so I can gauge the true urgency.
I never check voicemail abroad. What if there is an emergency? It doesn't happen. Problems solve themselves if you empower others to handle them.
It was four years ago that I discovered Pareto's law. Thanks to his ideas, I now work four hours a week and project $1.2 million in sales at my business for the next fiscal year. (For more on my techniques, see 4hourworkweek.com.) I've had time to set a world record in tango, pursue my passion for martial arts, and learn surfing on the beaches of Brazil. I have the freedom to enjoy a millionaire's lifestyle without waiting for retirement.
Posted by Bill Modzel (Member # 22) on :
Sounds like a great idea but I can't see most of it working for a small 1-3 person shop like most of us seem to be.
My wife was griping this morning about $35 jobs as she was making out the bank deposit. I don't like them but we had about 6 that took only a few minutes each to produce. It all counts at the end of the day.
Posted by Doug Allan (Member # 2247) on :
Thanks camille! I think that is an excellent story, just to encourage thinking up our own strategic shifts in behavior.
I've often thought of an outgoing voice mail that says I will check calls twice a day... I have never implemented that, but it is an idea with merit.
It depends on the client base. As my work shifts away from those $35 clients(actually I already don't do those much anymore)the bigger guys I get my best work from are also typically not answering their phones, & if they get replies within a day, I don't think I'd lose them... but the $35 guys would just move on to kick someone elses tires.. (which is good, because I probably wouldn't return their calls anyway)
Posted by Ricky Jackson (Member # 5082) on :
You are absolutely brilliant Camille!! I've known about the 80/20 law for some time and it's amazing how many other things it applies to as well.
Posted by jack wills (Member # 521) on :
You have read my mind.......
Posted by jack wills (Member # 521) on :
Camille, You might also try a new magazine called: "Portfolio" published by Conde nast. Many great features and models to follow for a person with your style of making gains in the future. I focused on a great article about hedge fund groups written by "Tom Wolfe". Kind of a follow up review from the Bonfire or the Vanities' days with a little more fire added.
Jack
Posted by Camille Norvaisas (Member # 501) on :
I'm not so sure Bill. I am a one woman shop and have one customer that probably is responsible for 50% of my business - if I can find another like it - I could kick the tire kickers to the curb like Doug mentioned. May be something to consider for all businesses regardless of size. Jack, thanks for the recommendation!
Posted by Bruce Williams (Member # 691) on :
"One way to keep my schedule lean was through a low-information diet. I never watch the news or buy the newspaper. I read the headlines through newspaper machines as I walk to lunch each day. My selective ignorance has never caused a single problem for me." ----------------- I can't buy that one whole-hog. TV and most newspapers, I agree: keep them out. I can't make signs and watch TV or handle paper at the same time. But I do like public radio, or at least non-commercial radio. There is some real info, culture and educational matter out there, in some places and some times. Selective knowledge has never caused a problem for me, if I don't have to stop working to have it.
