The 80/20 Rule

This past month was a sparse one for our blog posts, and we have good reason for it, too.  Recently we have been composing and putting together a book on how to start up and run a process serving company.  It is a basic primer that provides some of the nuts and bolts to get new process serving companies going, and perhaps provide tips for those of us who are more experienced on how to run more efficiently and/or become more profitable.  Hence, the blog suffered a bit while we worked out things to get the book published and ready on Amazon.com.

For those who might be interested, the book is titled, "The Business End of Process Service" by Bob Hill, and as far as we know it is available on Amazon.com, as well as available on Kindle as an ebook.  If you want us to send a copy to you, then please contact us at www.rtr-i.com, and we will be happy to send you a copy as well.

Now, as for the 80/20 rule, it is an axiom in business that states that 80 percent of your company's revenue will come from 20 percent of your customers.  Naturally, that means the remaining 80 percent of your customers will only provide 20 percent of your revenue. 

So what does this tell you?  Well, it says a lot about how to manage your overall book of clients.  First, in my opinion, those 20 percent who give you 80 percent of your work, you should really focus on giving them top notch and superior service.  That's not to say that you give the others poor quality service, not be any means, but just keep in mind who might be helping pay the mortgage versus who is only helping you pay for the cable bill.  There might come a moment when you might have to make a decision as to which customer to take care of first (the one that is part of the 20 percent, naturally).

The other thing the 80/20 rule can tell you is that it works in the opposite manner when it comes to the actual labor you will have to employ.  Although the 20 percent who give you 80 percent of your revenue will be labor intensive because of the volume of work, studies have shown that the remaining 80 percent of your clients who give you only 20 percent of your revenue will work you much harder (which is partially the reason, but not the entire reason, those customers only provide you with 20 percent of your revenue).  In other words the revenue generated by doing services for those remaining 80 percent of the customers will be demonstrably more labor intensive than it is for the 20 percent.  Don't ask me why it is like that, but it has been examined by top scientists, and that is their conclusion.  And, in my experience, that seems to be the case.

When comparing side by side an assignment from one of my larger client accounts (part of the 20 percent) and one from a very small client account (part of the remaining 80 percent), invariably the small client account's assignment is fraught with difficulties, an exaggerated increase in teeth gnashing on the part of the client (but sometimes by me), and perhaps more than would be necessary "hand-holding" for that particular client.  Additionally, the small client account customer sometimes wants and oftentimes asks for discounts on the service, which of course also effects your bottom-line.  The larger account (the one nestled within the 20 percent of your work and 80 percent of your revenue) tends to be less inclined towards these things for various reasons, such as since they are in frequent contact with you for your services, they are often comfortable and familiar with you, so there is less "hand-holding" and less anxiety on their part.  They understand the ebb of flow (your routine) of things in "your world", too, and so that tends to make things smoother.  Lastly, your larger client's (read: larger law firms) tend be able to absorb expenses better, so they are less likely to ask for discounts and/or special favors, and are willing to pay you what you are worth.  Remember, you are not just some trained monkey delivering papers.  You are a professionally trained process server with technical expertise in the area of executing court summons and other writs.  And the larger client accounts understand this, so they are willing to pay you a reasonable, competitive rate for your services. 

Just remember to take care of them.