Last night I had the pleasure to speak with one of our CS2 members in Texas. His name also is James. It was a good hour of conversation that spoke of the challenges and issues that we face as contractors. Tips and insights were shared.

James is a smart guy. James also asked me to write about something that he believes is key to running a successful business. I too believe it as well. I’ve written about the subject over a year ago. That said it’s always good to be reminded of sound principles, and there are more people reading these daily emails since I last written about a year ago.

The subject at hand is building sovereignty in your business by adopting a simple rule. The simple rule is this: not all customers are the right customers.

Many potential customers are practically holding up signs why you should not be doing business with them. Big red flags are being hoisted up in front of your very eyes. However, many contractors are so desperate for work that they ignore the telltale signs and end up regretting doing business.

We all know the signs, and I could write a book about it. Signs could be something as simple as:

• I have a lot of work if you give me a good price on this one I’ll give you all my work. 
• When you need it done? Yesterday!
• Customers that say they are going to do business with you, and don’t show up.
• Another contractor showing up to while you’re there.
• Customers telling you how much you should be charging.
• Customers trying to beat you down on price.
• Customers telling you when they’re going to pay.

If you want to survive in this business and more importantly if you want to be successful in this business, you have to be strong. You are the leader of your business. You dictate how your business is going to be run, not your customer.

James has learned from 25 years of experience. Experience is a great teacher. That said learning from those that have already been down this road before you is also a great teacher. Learn how to leverage from the mistakes of others.

As an expert in your trade, you have to believe that you are the best and your customers need to know that it is a privilege to do business with you.

I believe this with all my heart in my businesses and just one more reason why you must apply to become a member. It's also making sure that we are getting the best group of contractors to learn and leverage from. 

What do you need to know about your customers? You can afford to get rid of some.

Have you ever heard the old lie “that customers are always right or that the customer is never wrong?”

Yes you heard me right, I said lie. It may be a hard pill to swallow for a lot of contractors especially if they are experiencing tough times. It may sound counter-intuitive as well.

But the bottom line is, if you fail to apply the Paretto Principle (the 80/20 rule) to your customers, you're not running your business intelligently.

What is the Pareto Principle? 
Originally, the Pareto Principle referred to the observation that 80% of Italy’s wealth belonged to only 20% of the population.
More generally, the Pareto Principle is the observation (not law) that most things in life are not distributed evenly. It can mean all of the following things:

•    20% of the input creates 80% of the result
•    20% of the workers produce 80% of the result
•    20% of the customers create 80% of the revenue
•    And on and on…

So as near as it can be, 80% of your revenue will come from 20% of your customers. And, my friend, if you're treating that 20% in exactly the same way as you treat the 80%...you're making a very big mistake.

It's a complete myth that all customers are created equally. They're not, we were taught that they are. We have had this drilled into our heads, and it has become a part of our beliefs. 

Now is the time to get comfortable in saying goodbye to those customers who are sucking the life out of you and your business.

Think about the customers that are hard to work with. The ones that don’t pay their bills on time, complainers, the ones that want you drop everything you are doing to take care of them right now. The ones that want you to whore yourself out for low wages and so on so on.

Sack these customers! Once you sack them, it will be a liberating experience and exceptionally good business practice. Very few business owners run their business this way and the implications of their actions are proven time and time again. 

Do not be like the masses and don’t follow the heard. The majority of business owners do not know about the Pareto Principle and if they do, they lack the courage to implement it into their business. 

When I first became aware of the 80/20 rule, I was not comfortable with it either. I had the deep-rooted belief that all customers were right, and It was my job to serve everybody. Do you know what my business coach said? “As long as you are happy playing it small and getting mediocre results, keep that philosophy!!!”

I didn’t like hearing it at first but in time I implemented the 80/20 rule and the rewards have been great.

Ask yourself these three powerful questions below because your profits will depend on it.
1. When was the last time you did a thorough analysis of your customers in terms of how profitable they are?
2. Who, in your customer base, warrants the value and resources you offer...and who doesn't?
3. Which customers do you need to sack?

To your success ~ James Brush.