The Importance of Knowing Your Customer

Deciding clients - NorthwoodFor any small or medium sized enterprise, it’s more than likely that the relationship between any given business and the client will be one of a personal nature.  Bearing this in mind, it should become immediately obvious that knowing your individual client’s wants and needs could represent a significant advantage in making consistent sales.  However, as any person who has gone to a party alone will know, forcing yourself to make friends with a stranger can be hard, uncomfortable and time-consuming work. So, as an entrepreneur, how can you tell which clients are worth your time and which are likely to sail off into the sunset never to be seen again?

The 80/20 principle – the Law of the Vital Few

It may be a stretch to call this principle a rule of nature, but it really does accurately describe many phenomena in the animal kingdom, the cosmos and, most importantly, the world of business. This principle essentially states that for many events roughly 80% of the effects come from 20% of the causes. So, in a business context, this would imply that 80% of a business’s profits come from 20% of the business’s clients.

In light of this worldly wisdom, it’s strikingly obvious that entrepreneurs need to identify the 20% of their most valued clients and prioritise both their time and their energy in these clients’ favour.  This can extend in the opposite direction as well, namely to say that if a high maintenance client is taking up a lot of your time whilst offering little in the way of profit in return, there should be little hesitation from entrepreneurs to cut the aforementioned individual out of their business’s life.  Although it is admittedly tempting to try to personally attend to every client equally, this practice should be seen for what it is: woefully inefficient.

This is not to say that you should dispose of every client that isn’t part of the 20%, just that you should rather prioritise your time in favour of your more important clients.  Essentially, spend your time getting to know each client in proportion to how much profit they are worth to the business.


Any small business worth its salt should identify a set market to target as a matter of urgency.  Out of this target market, the business should then take the important step of identifying the major players in the aforementioned market that they would like to cater to.  Deciding the characteristics of the client your business will ultimately target is a serious but tough ask. However, there are a number of client characteristics that small business should aim towards:

  1. Recurring Clients – Businesses should target a brand of customer that will make use of their services time and time again.
  2. Low Maintenance Clients – Time is an entrepreneur’s most valuable asset and consistently giving it up to deal with the same client’s petty issues should be avoided.
  3. Clients with Ambition – It may be hard to determine, but it could potentially be worth a lot of money if your business can link itself to a client or business which aims to grow in the future.

Deciding what type of client to target and which of your clients to prioritise can represent a gruelling task, however, it will be well worth it in time and money saved in the long run, essentially achieving more, with less!

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