Corporate Finance Associates Blog

Most of us will have come across the commonly accepted 80/20 rule attributed to Vilfredo Pareto namely that 80% of our business can be attributed to 20% of our customers, conversely 20% of our customers probably account for wasting 80% of our time, in other words the cause is often much smaller than the effect both positively and negatively.

A past mentor of mine always used to say you can take that one stage further and there is a 95/5 rule that exists out there as well and the effects can often be even more marked.

Take for example direct marketing, at its absolute best leaflets that come through the door have a 5% chance of being acted upon, for many reasons, I know for example that leaflets and flyers promoting car insurance only motivate me to any action once a year at renewal time.

Another big one has got to be those businesses that face to face network, our own experience is that 19 out of 20 people say it doesn’t work so don’t pursue it and allow it enough time.  Couple this with internet marketers who are always saying at times of challenge, like we have now, only 5% of businesses actually increase marketing budgets whilst 95% cut back believing that they are looking at a cost not an investment.

Is it no surprise therefore that 95% of the wealth in the UK is believed to be vested in 5% of the population, maybe those individuals were always going to be part of that 5% group and this is just the reward for their efforts.

Perhaps the biggest indication of this “rule” however has got to be those who use social media in some form or other.  Most viral community forum operators know that 95% of the contributions come from 5% of the members, and it doesn’t matter which forum you are on, it is exactly the same.

It is the same with LinkedIn, Twitter, Facebook, blogging et al, of all the people in my growing database only about 5% are embracing these changes.  The ones I admire the most are the ones that still don’t understand it but do it anyway, as I’m sure a lot of the 5% wealthiest in the UK didn’t fully understand or even enjoy what gave them their successes at some point.

The Christmas and New Year period always gives me an opportunity to reflect on the recent past and where we go moving forward, and I think just accepting that this “rule” does exist helps me ask myself the question do I want to be part of the 5% moving forward or the 95% sucking their thumbs and feeling hard done by – No contest I believe