80/20 Customer Focus

A key business optimization strategy is analyzing your customer base after ~1 year to identify your best and worst customers, allowing you to focus resources effectively.

When to Do the Analysis

• Wait until ~9-12 months into business operations
• Don't do it too early when you're still figuring things out
• Early stage requires being "a little bit desperate" and taking most customers
• Need enough data to make meaningful conclusions

How to Conduct Analysis

• Draw up list of top 10-20% customers and bottom 10-20% customers
• Evaluate customers based on:
  • Time consumption
  • Profit margins
  • Support requirements
  • Headache factor
• Look for patterns in the data
• Identify characteristics that define best/worst customers

What to Look For

• Which customers:
  • Have highest lifetime value
  • Order more frequently
  • Require least support
  • Pay highest prices
  • Have lowest acquisition costs
• Find unexpected insights about who your ideal customer really is
• May discover your assumptions about best customers were wrong

Common Mistakes

• Taking any customer/money without being selective
• Getting stuck with "shit people" who drain resources
• Not regularly evaluating customer quality
• Spending 80% of time on worst customers
• Not firing bad customers when needed

Action Steps

• Focus acquisition on characteristics of best customers
• Consider firing worst customers
• Adjust pricing/operations to attract more ideal customers
• Reallocate resources toward highest value segments
• Use insights to refine target customer profile

The key insight is that most businesses get caught serving any customer rather than being strategic about who they serve. Regular customer analysis helps optimize focus and resources.