The 80/20 Issue
The 80/20 issue is from Vilfredo Pareto and dates back to 1906. He was writing about wealth and said that eighty percent of the wealth is held by twenty percent of the people. FYI, in the U.S. today it is closer to ninety percent, but that is a topic for another day.
The Pareto rule has been applied everywhere and has deep applications for your creative business. For those of you who have various levels of service and/or products, my guess is that you are living today with an 80/20 issue. Yes, twenty percent of your clients generate eighty percent of your revenue (and probably profits). If you jettisoned eighty percent of your clients you would only lose twenty percent of your business. You would gain a TON in extra time for not much lost in revenue/profits.
The math is easy. Break up your business into segments that matter to you. Let us say project cost buckets. Then list number of projects for the bucket and gross revenue for all projects in the bucket. If you can easily figure it out, list net revenue for each bucket. You will likely see your 80/20 issue staring you in the face.
Now to work on the solution. Of course, you want to minimize the bottom. So set a floor for the bottom ten percent at a price or minimum ten percent higher than the bucket. If the bottom ten percent of your creative business by number of clients generates five percent of your revenue then you would set the minimum project cost at ten percent higher than this bucket. This is business you can absolutely afford to lose without blinking an eye. And you should.
Moving up the ladder, if there is business that you need but do not necessarily find vital (i.e., just below your sweet spot), the goal has to be to narrow the range to drive this client into your sweet spot for this area of your business. Ironically, this means capping options for this client. Say you are a florist and your sweet spot starts at $7,000 for a project but you are consistently at $4,500 to $6,500, you would want to possibly raise your minimum here to $5,500 but offer nothing in excess of $8,000. If they wanted to spend more than $8,000, they would have to jump to another category — say one that starts at $12,000. This creates a no-fly zone where effectively you offer nothing between $8,000 and $12,000.
For the most part, my answer to any 80/20 issue is to create the “no-fly zone” where your creative business offers nothing in this area so that clients will remain where they find the most value and your creative business earns the most. When clients cannot tell which category they are in, the tend to go for the margin. What this means is that all things will push to the bottom and create an 80/20 problem. With distinct offerings created by a no-fly zone, value will separated accordingly. Think of it this way, ready-to-wear versus couture. Ready-to-wear depends on knowledge of existing inventory, couture on customization. If prices and process are too close, the expectation will be for ready-to-wear to receive couture value while those willing to pay for couture will disappear, leaving couture to get cheaper and cheaper. Hello 80/20.
Being An Expert To Get To The Next Level
If you know what you are deeply passionate about as an artist and creative business owner (and assuming you have talent), inevitably you will go deeper and farther than most in that one thing. Not just the topic, but your area of the topic. Not just floral design, but maybe neo classic floral design in Texas. Of course, your interests may expand beyond the one thing, however the one thing will always be your core. You must then own the space, put yourself out there as the expert you are and talk to those that care.
Of course, those that care will come in waves. When gay marriage became the law of the land, interest in how to best design and produce gay weddings peaked. Now that we are a few years in, the depth of caring has waned. Does this mean you have to pivot to another topic to remain relevant? I do not think so. It just means you too have to evolve, to go deeper into what you love, resonate more intensely with those that still care. The facts of what you know never matter as much as your willingness to ever deeper.
The caveat, of course, is if you became the expert because you saw opportunity more than you believed in the purpose of the topic. Then, when the spotlight fades and others are moving on to the next “it” topic you will inevitably feel left behind. If that is you, it is never too late to delve into the one thing you are truly passionate about.
The global answer though is, yes, you have to become an expert, the expert, in what you stand for. You must become the teacher both to your industry and to your clients. You do it because there will be trust, faith that you care enough to deliver on what matters most to those listening. Do not do it for the money. The money may come but it will only be as a result of authenticity not the other way around.
Here is the thing, if you are not willing to share what you know, what drives you, with your world, why should we trust you? Your portfolio will only speak for itself if you give us context. That means you have to step into yourself and own your world. Give us something to believe in and we will. Whether that is an audience of one or millions, it does not matter, doing the work day after day after day does.
