Page 116 - The Magic of Tiny Business

Chapter Six  Tiny Business Is Lean Business

(20 percent) that brought in most of the revenue. He
thought I was crazy. Nevertheless, a very clever IT
manager wrote a quick program that ranked each item by
sales. The result: the cumulative total somewhere
between the 1,150th and 1,250th items generated 80
percent of the total sales.

So how did this help me? I immediately told the
purchasing manager to buy an extra 10 percent reserve of
each of the top 20 percent items and cut back on reserves of
everything else.

Sales increased because they were never out of stock of
the key items, and total inventory went down because they
weren’t carrying so much of the slow movers that eventually
went out of date. The increased sales and fewer expired
goods that resulted were the first steps to getting them out
of the hole.

Exercise: 80/20 Your Tiny Business

Dive deep into your books to learn:
® Who are your top 20 percent of customers? How do you make

sure they are kept happy?
® What are the products or services you provide that bring in

80 percent of your sales (“the significant few”)? How do you
ensure you’re never out of them?
® What are the items that will have no impact if you run out (“the
insignificant many”)? Can you cut back on inventory of these
products?
® Which marketing endeavors bring in the best results (80 percent)?
How can you concentrate your efforts on refining these
initiatives?
® Is there a geographical cluster where your best customers live?
And how can you find more customers there or in similar
locations?

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