The 2-4-8 Model
This model compares revenue against time allocation, helping us to make informed decisions around clients, productivity and sustainability.
Identify each of your clients in descending order by revenue ($) or profit margin (%). Place each client into the grid below, inserting your highest value client at number one and so on. You can continue down to 16 or 32 or 64 should you wish to.
Now consider the respective relationships in your grid and the amount of time you and your business spends servicing each client – for example:
- Client No. 1 generates 20% of revenue and takes up 5% of time;
- Client No. 7 generates 3% of revenue and takes up 20% of time.
Do we spend enough time with those clients that we should, and too much time with those that we shouldn’t?
Now consider the revenue over the past three years. Is the revenue for each client trending up, down, or no change?
Do you have the capability to increase your share of wallet with Client No. 7? If yes, work out a plan. If no, this client may not be financially sustainable in the long term and you need to consider your options.
This approach uses the three-year 2-4-8 analysis to project out future revenues. Use a grid chart to identify gaps in your revenue.
In the example above, March has no projected revenue; therefore, based on the Relationship Bell Curve concept (see below), we should have looked for opportunities to close the gap 6 to 12 months ago!
The Relationship Bell Curve
We live in an environment where everything operates at speed. We want everything and we want it now.
But effective relationships take time to develop, and to build successful, profitable relationships you must embrace long-term thinking vs short-term thinking!
It takes on average, around 6 to 12 months to develop a relationship (70%). In some instances it may happen a lot quicker (15%) and, in other cases, it may take a lot longer (15%).
Mahatma Ghandi said “The future depends on what you do in the present”.
Make sure that you are working on your relationships well in advance!