Looking to Expand Your Company? Think About Leveraging a Virtual PBX

Are you looking for that “secret sauce” that will guarantee long term success for your business? Then look not further than Pareto’s rule also known as the 80/20 principle in addition to next-generation technological innovations including a virtual PBX.

Highlighted in a blog post, virtual PBX provider Nextiva stated, “In 1906, an Italian economist named Vilfredo Pareto noticed that 80 percent of the land in Italy was owned by 20 percent of the population. He started looking around and noticed that 20 percent of the pea pods in his garden contained 80 percent of the peas, and so and on and so on. He determined that much of life, and much of business, can be categorized with this 80/20 principle.” In fact, you may have already been made aware that nearly 80 percent of your sales come from only 20 percent of your clients, but you may have not known until now that the sentiment actually has been derived from Pareto's law.

While you be thinking right about now is, “What does something from the early 1900’s has to do with my company?,” the ideology was actually brought to light in a recent presentation from Peter Philippi, the president of Strategex, an organization that heavily leverages the 80/20 rule. Closely analyzing the P&L of nearly 1,000 companies which can be seen in the chart below, Phillippi noticed that almost 89 percent of revenue comes from the top 25 percent of clients.

Now that I have shown you that this notion from countless years ago still rings true in the year 2013, how can you apply it your own organization’s operations? First, you must identify who falls into the top 20 to 25 percent of customers. To do this, you must determine the revenue you raked in from each client within the last year and then break those clients into quartiles. “For example if you have 160 clients over the last 12 months, the top 40 revenue producers would be in the top quartile, the next 40 in the top middle quartile, and so on,” the post added.

Now that you have those numbers under control, you should then figure out the percentage of overall revenue seen from each quartile. To accomplish this, add up each client’s revenue within every quartile and then divide it by the total revenue for all four quartiles, the post recommends. You will then be able to see how much time is spent by your employee base on each quartile, which needs to be divided by your overall operational costs. Last, take your total revenue by each quartile and subtract the amount of effort spent on each quartile. The result? You can now clearly see the net profit your business has yielded.

While this information is very important to the future of your organization, utilizing it your advantage rather than just looking at it is key. If you know exactly who falls in your top client’s category, it is much easier to target them directly in order to drive profitability. Be sure to educate yourself on which industries they are involved in, as well as their demographic and then adjust your marketing efforts to appeal to them. Also, take a closer look into who falls in your lower client segment, which will enable you to gain crucial insight into how you can better meet their needs.

Yet for your entire base, ongoing access to robust solutions like a virtual PBX can almost guarantee their long term partnership with your business. This is because of the functions it powers including: an auto attendant, speech recognition capabilities, automatic call routing and a significant reduction in expenses overall. Match this with the 80/20 rule and you will see growth rates like never before, I promise.

Edited by Ashley Caputo