The Pareto Principle, also commonly called the 80/20 Rule, states that about 80% of outcomes come from 20% of causes. While this principle can be helpful in prioritizing high-impact tasks and can help increase your productivity, it can also help you grow your business by identifying your best clients and determining what it is about them that makes them as such so you can target similar individuals as potential clients. The better you know the profiles of your best clients, the better you can manage them. Moreover, this will allow you to effectively identify traits of clients who should be more likely to make a referral.

Start Here!

Identify your ideal customer profile with the 80/20 rule:

  • Find patterns among the clients that produce the most revenue for your firm
  • Establish annual revenue generated by each client using 12+ months of data
  • Once the total revenue is determined, create a client list and sort it based on different levels of production
  • Determine where 80% of your revenue comes from
  • It’s usually from about 20% of your “best” clients

What You Can Learn

Understanding where the bulk of the revenue comes from, as well as the client profiles that make it up should be a top priority for every advisor. Determining your 80/20 is simple:

  • Start with knowing your total revenue in the past year
  • Create a list of revenue generated by each client, starting with the biggest to the smallest
  • Add from the top down until you get to 80% of your total revenue
  • The revenue generated from your smallest client among the top 80% will be your benchmark for all key clients

How You Can Target Better

Now, examine the traits of your KEY clients. Where do they live? What is their occupation? What do they like to do for fun? This will help you to establish your ideal customer profile, or client avatar. You can also strategically take steps to do three crucial things to grow your business, by asking:

  • What can I do to keep and grow my key accounts?
  • What can I do to grow the assets of my “mid-tier” accounts so they can achieve “key” status?
  • How can I avoid, or limit my time with the bottom third of the list?