Cracking the Pareto Code

Ever heard of the “80/20 Rule”? That’s the well-known principle that says that in every sales organization 20% of the salespeople win 80% of the sales (and money!) while the remaining 80% are all splitting up 20% of the revenue. So, which category do you want to be a part of – the Top 20%, or what I refer to as the Sales HEROES, right?

Where did this rule come from? In fact, the 80/20 rule is not a rule, it’s a “law.” It comes from the work of Vilfredo Pareto, an eighteenth-century Italian economist. His studies on economics and productivity led to the conclusion that in just about any endeavor, 80 percent of the productivity will come from only 20 percent of the efforts. Eighty percent of the profits are produced by 20 percent of the employees. In a police force, 80 percent of the arrests are made by 20 percent of the officers. It can be applied another way: 20 percent of a business’s customers create 80 percent of the problems. And so on.

Want to be a Sales HERO? You can use Pareto’s Law to your advantage! Create an action plan that embraces the law rather than fights it. Meetings, crisis management, phone calls, office chat, paperwork, getting your ducks all lined up in a row are NOT part of the 20 percent of your activity that is directly attributable to creating new business. There is only one task proven to directly lead to achieving your sales objectives: cold calling or prospecting. I have seen every possible attempt to find a way around Pareto’s Law but none has succeeded. Once you accept the reality that you cannot change the rules of the numbers game, you will be able to make the decision simply to play by the rules or quit.

How many prospecting calls do you have to make? Let’s apply Pareto’s Law to find out. Let’s say you decide to “complete” 100 prospecting calls in a given period of time. According to Pareto’s Law, you will have had to walk through about five doors or made five phone attempts to actually reach one decision maker (20 percent of the total). Therefore, you will make 500 attempts to attain your goal of completing 100 prospecting calls. Of the 100 decision makers you actually spoke with, 20 (20 percent) are going to have a genuine interest and will stay in the game — your pipeline — for further follow up, while 80 (80 percent), no matter how good at selling you are or how much you know they need what you have to offer, are simply not going to be interested — they are out of the game for the time being. Now, through appointments, proposals, and follow-up calls, you will find that 80 percent (or 16) of the 20 prospects that were still IN the game are not going to buy (at least not right now), for whatever reason. There is absolutely nothing you can do about it. It’s not you, it’s the law. Don’t worry, they may get back in the game later! That leaves four decision makers who buy your product now! Congratulations, you just made your first four sales! At first this may seem like small reward for all your efforts, but you will learn that it is a good, solid formula that will always help you get from ZERO to Sales HERO in 90 days!

Try this – Invest 80% of your productive time prospecting for new business for three straight months. If you do, you’ll find that from there forward you will never need to invest more than 20% of your time prospecting to keep your momentum going. As you mature in your sales career you will learn many skills, techniques and ideas that will help you learn to work smarter rather than harder, and to leverage relationships and referrals to build your sales empire. Just remember – whenever you start fresh with a new opportunity, or if you find yourself in a slump and need to get out of it fast – start a 90 day action plan that embraces Pareto’s Law – I guarantee you will be on your way to the Top 20% of all salespeople in the world!

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