The 20% rule

You'll find that with most of these articles and videos, a lot of this is based on personal experience.

Now I've been told that I am a natural entrepreneur, but I never quite worked out what that meant?

Maybe a natural ability to talk to people – A social butterfly?

A way of explaining things which others find easy to understand and thus, more likely to go ahead with my proposition?

The ability to see outside the box and make suggestions others didn’t think of?

Well, it’s for these reasons I have put this together. Maybe be your own judgment and see if these skills and suggestions help you? I know all of the advisors I’ve trained (successfully and unsuccessfully) have certain traits which made or break them. Interestingly, the ones who were more likely to let go of egos and listen and learn became more successful. Those who came with an ego and an unwillingness to learn, failed.

So what’s the 20% rule? Well, it needs to be taken in conjunction with the other lessons and videos in this series. Clearly, in isolation, this won’t make sense, but it will at least give you an idea of why it’s important.

Have you ever heard of the saying, spend 80% with your top 20% clients?

In a previous lesson, I’ve talked about the hourly rate, so at what point should this become apparent with your top 20%?

Simply put, your top 20% of clients should bring home 80% of your income/revenue/profit.

If you find that you're spending time with someone outside this remit, it’s time to evaluate. HOWEVER.

Not all business is financially led.

What if one of your clients is outside the top 20%, but provides you with regular new prospects?

Consideration should be given to rewarding those who are not financially motivated.

An example:

Running a wealth management company, I do not distinguish clients based on how much money they have. Crazy, I know!

Instead, we categorize clients based on how many reviews they need per year. Think about it.

Someone who has a lot of money but only needs to see me once a year and doesn’t interact, are they a top 20% client because of their wealth? No.

Someone who needs to see me 4 times a year because they have complex needs generally results in some sort of business. Are they top 20%? Generally yes.

Indeed, wealth follows wealth. So those that need to see me 4 times a year, speak and converse with those who also have complex wealth. It’s not an exact science, but I find they tend to have friendship groups close to their own life.

So back to the 20% rule

Use this in the following circumstances:

Marketing

Invest to make at least a 20% profit.

If you spend £1,000 on a magazine article, you need to see a return of £1,250 (20% upwards, remember).

Client Events

The cost of the ticket, against the potential new business, needs to have a minimum of a 20% return. I sometimes use the rule of 3 here as well for the higher cost events. For example, if I take 5 people to the horse racing at a cost of £2,500, I expect a return of £7,500.

For lower-cost events (£50 per head dinners), 20% works, so a little judgment is needed.

Time

Your time is precious, and there is an article which covers your hourly rate. Similar to this, the 20% rule means you should spend time with your top 20% clients.

Interestingly if your top 20% clients are more than you can handle, then time to train a protégé!