The Skinny End of the Pareto Principle

I want to be careful here to avoid equating the business of graphic design to, say, selling vacuum cleaners. Obviously, there is a world of difference, but when you distill it down to the essentials, graphic design is like a lot of other businesses in that it's all about the numbers.

Between the cost of operating a studio (rent, utilities, insurance), staffing the studio, marketing and so forth, there is a number we have to hit every month just to keep the doors open. So, in effect, I know that every month I need to move X units of graphic design. The units vary in shape and size (logo design, brochure design, photo shoot, etc.), but I need to move enough units to pay everybody else and then hopefully have enough left over to pay myself.

I'm a big believer in the Pareto Principle, also known as the 80-20 rule among other names. Basically, the Pareto Principle says that 80% of your business comes from 20% of your clients. (Note: the Pareto Principle does not apply to just business, but to many other things such as baseball teams--80% of your run production comes from 20% of your players, for example.)

I first learned about this notion while I was a general manager with Kinko's and it proved itself valid time and time again. The way we applied the Principle at Kinko's was that we focused the lion's share of our marketing efforts on the clients who were already loyal (and often major) customers. This is a valid approach and it worked--in about three years I grew my store from about $30K per month to over $100K per month.

The Pareto Principle applies design studios and ad agencies, too, bit that runs straight into one of my worst business fears--having all of my eggs in one basket. I know of several studios and agencies that have gone out of business because one or two big clients moved their business and the revenue loss killed the studio. And I know of many more who lived in mortal fear of it happening to them. Nobody wants to have too much business from any single client, but it just sort of happens over time. You keep doing a good job, they keep bringing you more and more business. Then one day something goes wrong or the client is purchased by someone who mandates that their agency be used and it is all over.

There is one company in the region who, if they were to go out of business or pull all of their business out of the region, would kill a BUNCH of agencies/studios. Maybe not right away, but over the course of a year it would be a bloodbath. The principles would get out okay, but for the studio rank-and-file it would be all over. The Tri-Cities would find itself flooded with designers and copywriters, many of whom would take to freelancing, which would hurt freelancers and other small studios. The trickle-down effect would be devastating on the local design and advertising industry.

To avoid the all-eggs-in-one-basket trap, I have tried to take a different approach by focusing my attention on the 20% side of the Pareto Principle. Not so much the 20% of clients who are occasional clients, but the 100% of potential clients who don't work with us. Yet.

I make a conscious effort to reach out to a wide variety of clients in a variety of industries. The effect of making phone calls and meeting with potential clients leaves me feeling a little bit like a door-to-door salesman. I'm not trying to sell anyone a logo design they don't need (although, believe me, there are plenty of people in need of a new logo design--I'm talking to you Sherwin Williams), but there is a degree of discomfort in asking people for new business.

Discomfort or not, I need to keep making the phone calls and setting the meetings. The more people who see the work 989 Design has done, the more people want to work with 989 Design. A pretty high percentage of our meetings turn into actual work, which is something I am very proud of.

The way I see it, as long as we continue doing great work and keep working the skinny end of the Pareto Principle, we should be in pretty good shape.