Episode #26 Improving Your Business Immediately with Pareto’s 80/20 Rule and Tea

Would you like a quick way to improve your business? Have other projects taken too long before showing results?  Learn a faster way to improve your business in different areas with Pareto’s 80/20 Rule.  Join Rick and Brandon on the Improv-ing Business Podcast as they discuss Rick’s visit to the Charleston Tea Plantation and how the 80/20 Rule applies to tea.

While you listen, click button below to download worksheet (free) that goes with this podcast.
 

1. Make sure you accounting records are in reasonably good shape. If they are not, then all of this is a waste of time.
   1. You will need the following information:
      1. Balance sheet and income statement on the Accrual basis of accounting.
      2. If you set up your accounting system to analyze your company, this part can be easier.

• If you do not have your books set up this way, talk to your accountant.

2. Analyze your customers
   1. Customer matrix
   2. Look at the top tier of your customers:
   3. Look at the bottom tier of customers?

3. Analyze your products or services
   1. Product-based business matrix
      1. Product Matrix
      2. Is the top gross profit percentage level of your products also your biggest seller? Why not?

• Why is your profit margin bigger for this group?  Should you duplicate the production process of these products to lesser profitable products?
• Look at your lowest level products and determine if you should continue to sell them.

1. Service-based business matrix
   1. Service-based matrix
      1. Why are you making more money with the top 25% of your services? Is it the personnel?  Is it the process?
      2. Should you reallocate personnel how you work on the bottom tier of services?
      3. Should you discontinue these low profiting services?
2. Analyze by competitive segment
   1. Competitive segment (from The 80/20 Principle) is defined as “a part of your business where you face a different competitor or different competitive dynamics.”
   2. Sort this schedule of segmentsby the largest gross profit percentage to the smallest.
   3. Divide your list by quarters: The top 25%; the second, third, and the lowest 25% of gross profit.
   4. TEA: Their competition could be different if selling to food markets, consumers, and hotels, for example.

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