Growth

The Rule of 20%

20% of your product catalog contributes to 80% of your revenue. In your business, you will see 20% coming up again and again. In product decisions, in investor talks. Everywhere. Today, we thought we would look at one more aspect of it.

**TL;DR**:

1. All our posts will have a TL;DR section at the start. I would try to squeeze in as much value in there as possible. And for details, the main post is always there.
2. We are creating a web analytics platform, with an intelligence layer on top of it. The intent is to free you of the grueling task of doing data analysis on your own, and bring you closer to execution.
3. If all goes well, we should introduce you to the product in a matter of a couple of weeks.
4. If you are a software product, you **need** to be growing at least 20% year-on-year. (It's both critical, and non-negotiable)
5. If you are growing 20% month-on-month, you are going to find yourself overwhelmed with interest all the time.
6. So how do we grow? By analysing all sorts of data. All the time. But, in the right business context.

There is a ‘not so unspoken’ figure that rules the world of startups.

20%

“20% of your product catalog contributes to 80% of your revenue.” We are all familiar with this variation of the Pareto Principle, or as it is better known - The 80/20 Rule

But I am not talking about that today. I am referring to the growth trajectory you are supposed to have. At least 20%. According to a report published by McK a while back, if a softbare business is not growing 20% year-on-year, it has already lost the game. The chances of failure in such a case is more than 90%.

On the flip side, if you are growing 20% month on month, you won’t come across a single investor who is not just itching to invest in you.

It all boils down to one small figure. 20% And it is everywhere. Is your monthly lost revenue more than 20% of your MRR? Because if it is, you are in for a rude awakening down the road.

So, what is the significance of all of this

The point to be made here is quite simple really. Stay on top of your metrics. All the time. Granted, the severity of any of it is much higher for a mid to late stage company as compared to an early stage, but even if you are an early stage business, it would be a grave misstep to waive these off. Percentages and compounded calculations are funny that way. It doesn’t matter if you use some tool to keep track of your numbers or if you are doing it yourself, but you need to keep track of it.

Monitor it, measure it, and decide your next courses of action based on those measurements.

  1. Which blog posts are your customers most engaging with? Is there any discernible pattern to it? How can you replicate this behavior to attract more customers?
  2. Which blog posts (or type of blog posts) are most valuable in terms of the leads they generate?
  3. Which ones can you attribute sales to? Why? What is it about them that is making your audience get convinced to transact with you?
  4. What marketing channel is yielding the best results, vis-a-vis the resources being put into them? Both in terms of volume and cost per result.

Most of the moves you make in your business are strategic in nature, and data does help you make the right decisions. But it is not data operating in silos that guides effective decision making. It is data applied in context; which means, most of the times you have two different data sets working together to show you the best way forward.

Take a simple example. Channel A gives me the best cost per result, but Channel B yields the best velocity (results per day etc). So which one should I double down on? I can go with either Channel A, or Channel B. Both of those decisions are right in their own way. But, most of the times, the right path would be somewhere in between. So that I can keep my overall cost down, but at the same time continue moving my business forward at an aggressive pace. Now, whether this right path would be closer to A or B on the plotted map would depend on my analysis of mapping cost vs velocity. Makes sense, doesn’t it.

It all sounds good in theory, but when you get down to executing this whole model, it can get complicated really fast. And if you have to do it on a continuous basis, chances are sooner or later, this exercise will begin to slip through the cracks.

This is where data analytical and insight platforms like Benne become crucial. Benne’s analytical models are doing all these calculations for you behind the scene. All the time. You open up your dashboard, and Benne has the results ready for you. Results that are compiled from hundreds of data models and paradigms, just like the one we just described. Some of them even more complicated than this. You would find your time suddenly freed up to execute the items that give your business a boost.

If you have any questions about Benne, or business growth and marketing strategy in general, you just need to ask. I’ll be happy to talk.

That’s it for today.

Abhishek

Subscribe to Benne Analytics Blog

Get the latest posts delivered right to your inbox