July 16, 2018

Media Mention: Forbes | What To Do When Your Business Sucks Too Much

In a business context, the 80/20 principle is pretty simple: Approximately 80 percent of a company’s revenue or profit value comes directly from 20 percent of its resources, like product lines, customers and even people. Although you may dismiss this as a cliché, the principle has been supported by numerous studies all with a gut-wrenching conclusion: It’s true.

Featured Image
twitterfacebook

Peter Philippi, Strategex's Founder and Chairman of the Board is interviewed by Forbes about Strategex's sucessful 80/20 Profit & Growth practice. The article is a great third party perspective on Peter, Strategex, and the power of 80/20.

An excerpt from the article:

Growing yourself into profitability is a flawed strategy. Many established businesses, whether or not they are focused on the 80/20 rule, attempt to grow themselves into profitability, convincing themselves that they just need to get over an overhead hump. We’ve made this mistake. However, adding sales, products, customers, employees and expanded capabilities doesn’t change the underlying situation: A minority of your customers are responsible for the vast majority of your profitability.

Cutting your way to profitability won’t work either. On the flip side, simply getting leaner is an equally ineffective strategy when implemented without an underlying understanding of where and why your resources are being used. You’ll just wind up cutting your muscle along with your fat.

It’s hard to implement. According to Peter, “Business leaders who have heard about the 80/20 rule often botch the process because they get started and then stop because of internal objections. ‘We need a complete product line,’ ‘We need to absorb our fixed costs,’ and a long list of other excuses. When the going gets tough (as it always does), that’s when people give up on 80/20. I’m not saying that you shouldn’t grow, or that you shouldn’t reduce waste. Rather, I do suggest leaders focus their limited resources in the areas that offer the greatest return, and improve overall profitability—sensibly, incrementally and without alienating your most important customers and people.”

Read The Forbes Article

Related Content

80/20 Profit & Growth

Dramatically improve your financials with time-tested processes that improve net income and grow profitability. Our 80/20 Profit & Growth approach to strategic planning drives profitable market share growth.

Arrow Green Read More