Determining Your Sales Gap and Applying the 80 / 15 / 5 Rule to Increase Your Business Sales

Knoji reviews products and up-and-coming brands we think you'll love. In certain cases, we may receive a commission from brands mentioned in our guides. Learn more.
Learn to teach and apply a business growth plan that will be a measurable tool that all of their employees will buy in to.

For many companies (small to large) the task of implementing a sales, marketing and growth plan is a daunting task and one that likely will either not be implemented or worse yet misunderstood.

Many times managers and owners know that they have an outstanding product or service to offer however they leave the task of introduction and growth to an unqualified process or worse yet hire an outside consulting firm that will charge thousands and yield hundreds.

This process is very simple to understand and implement and if followed correctly will yield you measurable actions that will lead to measurable growth and profits.

Determine Your Sales GAP - When setting a sales goal most people believe they  have to make up the entire number through the sales plan.  However an existing business has a base that if served and cultivated will provide them a strong foundation to build upon.  What the planning process should focus on is the GAP figure needed to meet your new goal.

As an example, you companies sales the prior year were $1 million and you have set your new sales goal at $1.3 million.  Making the assumption that in some manner 85-90% of your prior years business will repeat, your foundation number to begin planning is $850,000.  Thus your growth actions should be focused on growing $450,000, not producing a plan for $1.3 million.

The 80/15/5 Principle - Look at your entire customer base and the sales they have contributed in the past 12 months.  Determine which of these customers account for 80% of your sales.  This group becomes your A list of accounts and should begin receiving the Gold Crown treatment.  This list will be your shortest list.

The next step is to  determine the customers who contributed 15% of your sales and fall into your B listing of customers.  This group will be larger than your A group and are critical to your growth plan.  Reviewing these accounts closely should allow you to determine that if they received additional focus, resources, products, etc they could grow to an A level account.  If they don't offer that potential then they need to be maintained until they can be replaced.  You need to apply the "either up or out" principle.

Lastly the remaining group of customers will be your C level accounts.  They make up 5% or less of your business and in many cases will require the most attention (high maintenance and cost).  If you have a sales force you may also find that these accounts receive a higher percentage of their calling time, mainly due to friendship or the ease of calling on them (coffee and donuts?).

Make A Plan - Now that you have determined your sales GAP and identified your customers you need to look deeply at each A level account and speak openly with them about your objectives.  There is no customer who will not be supportive of a suppliers objectives to not only grow their business but will also provide them with either profit and growth opportunities or cost savings.

Work closely with them to see how your products and services can be applied to other parts of their operation.  Remember that growing an existing customer that know you is much easier than finding and developing new accounts.  Also keep in mind that while you may feel you have the customer covered most likely there are other people within the account that you need to be speaking with.  The same approach can and should be used with any B level account that you determine has the potential to grow with your company.

Next determine the actions you will take, the timeframe you will need, the resources required and who will be involved in making it work.  Measure the steps using a stop light method (green/yellow/red) so that progress is easily visable to all involved.  You should also apply a dollar figure to each of your actions and objectives.  After all, keeping score is part of the game.

Next article will speak to finding new accounts.

1 comment

Posted on Dec 1, 2010