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March 19, 2013

Ever Heard of Pareto?

2 min read

Topic: Insurance Sales Insurance Agency Management Insurance Agency Growth Strategies

Have you ever heard of Pareto?

Yeah, me too.  He’s that South American soccer star right?  Used to date that singer who could go in every direction at once didn’t he?

Uh, no.  He’s actually much more interesting.

Vilfredo Pareto was an Italian economist (no this is not an oxymoron!) who observed in 1906 that 80% of the land in Italy was owned by 20% of the population.  He went on to discover that this rough relationship applied in all sorts of situations.  Eventually, the principle Pareto discovered became known as the 80/20 rule by many in business.   Enter Roger Sitkins…

Roger is a Sales Coach working in the insurance agency industry.  I first heard him speak on a cruise paid for by Safeco Insurance a number of years ago.  In his talk he introduced me to Pareto and his principle.  And he challenged me (well all of us actually, I was crowded into the back of the room with all the other insurance agents) to apply it to my book of business.

The idea, as Roger explained, was that 80% of my income came from 20% of my clients and 20% of my income came from 80%.  Focus on the 20%, Roger said, and get rid of the 80%.  “You will make a lot more money”!

So, I tried it.  On January 3rd I printed my customer list.  Big to small.  With calculator in hand I ran down the page until I got to 80% of the total commissions.  I drew a line.  Counted the customers.

I’ll be darned!  20% of my customers paid me 80% of my income.  So, I gave the 80% list to a so-called “producer” (you know who I’m talking about – you’ve got ‘em too – unless you follow this blog and have gotten rid of those blood suckers) and said, “I never want to deal with these again!” 

Guess how long it took to go replace that income?

February 16th

I’m a big believer in Vilfredo!  Tried to name my eldest son after him, but my wife said there are some things she just won’t go along with!

Anyway, give it a try in your agency.  Keep the customers if you want, just have someone else deal with them.  You focus on the 20% and watch your agency take off!