Many people in business and in sales positions are missing out on huge profits simply become they don't know how to profit from keeping good records. In this article I will show you are few tricks that made me a lot of money.

I am going to outline three applications of just one way in which you can profit from good record keeping. Of course there are many others that you should investigate as well.

Knowing Where Your Profits Come From

You may be familiar with the 80/20 rule, proposed by economist Joseph Juran in 1941 and named by him the Pareto Principle in honor of how his study of the works of Vilfredo Pareto (who died in 1923) had contributed to his thinking.

The basic premise is that for many phenomena 80% of the consequences result from only 20% of the causes. In selling, for example, it is typical to find that 80% of your sales will come from 20% of their clients. This also hold in human resources where you generally find that 80% of the valuable results from any team of workers will come from 20% of their activity.

The trick, of course, is to know in advance what those 20% activities are. If you can do this then you can concentrate on doing more of those types of activities and gain much greater rewards for your efforts.

There are three areas where good record keeping can allow you to increase your profits as a result of basing your energy output on a sound 80/20 analysis.

Area1: Identifying Which Customers You Should Be Focusing On.

If you keep a good records of your clients and their buying habits then you can determine which of those clients are in the 20%, high value category and which are in the 80%, low value category. Further to that you can identify the buying trends in your high value group relative to the buying trends in your low value group. By knowing these you will quickly be able to identify whether or not a relatively new client is likely to become a high value or low value client.

With the ability to quickly identify potentially high value clients you can allocate more, and higher quality, resources (e.g. your best salesperson) to servicing such clients. In this way you can substantially increase your bottom line return on efforts.

Your should also be willing to let go of your low value clients as you replace them with high value clients. Imaging the profits from a business that only had high value clients.

If you find it difficult emotionally to let go of low value clients then at least put in place a system that services their needs with minimal expenditure of time and money from your business budget.

Area 2: Identifying Which Of Your Efforts Are Producing The Results.

By keeping good records of how your workforce spends its time and what results from those activities you can determine which activities fall into the 20% high value group and which fall into the 80% low value group.

Say, for example, that you found that your high paid sales force was spending most of their time prospecting and doing admin work, but that the profits came from the relatively small amount of time they spent in front of the client, then you could delegate that prospecting and admin to competent, but lower paid people, and keep your sales person busy in front of clients as often as possible. This could substantially increase your bottom line profits, as well as helping you retain your best sales people.

By the way, when you are assessing the productively of your staff's activities don't forget to include your own activities in the analysis. You may be surprised at how much more efficiently you could be performing.

Area 3: Identifying Which Of Your Marketing Activities Is Producing Your Profits.

Most companies spend a considerable amount of their budget on marketing, yet when you talk to them very few can tell you specifically which marketing activities are generating the most profits.

You must have a system in place for determining the results of each marketing dollar spent. If you don't then you are throwing away a lot of your money.

Marketing companies and marketing departments typically resist attempts to measure their results. That in itself should tell you that much of your marketing dollar is being wasted. According to the 80/20 rule you are probably getting poor results from 80% of what you are spending.

Keeping good records in this area can allow you to stop spending money in low productivity marketing efforts and redirect that spending into high productivity efforts. This is not an attempt to reduce your marketing budget it is a strategy for increasing the bottom line returns gained from your marketing budget.

If your marketing people can't come up with ways for measuring the difference in results for their various activities then tell them that you are going to get rid of them and replace them with marketers who can measure results effectiveness. You may be surprised at how quickly they discover that there is a good measuring system after all.

Conclusion

If you keep good records of the buying patterns of your clients, the return for effort of your staff's activities, and the return for dollars of your marketing strategies then you will be in a position to substantially increase your bottom line profits by reallocating your resources to higher profit producing uses.


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