This rule will cut costs and improve management
One simple equation can solve any number of problems plaguing your business, writes Ken Burgin. Read on to find out how you can put the 80/20 rule to work.
The 80/20 rule is simple — it says that a relatively small number of causes (about 20 percent) is responsible for a great number of effects (roughly 80 percent). So if you find out what the 20 percent are, and work on them, you can have a significant impact on sales improvement, cost reduction and the effectiveness of managers.
It often means 80 percent of your sales comes from 20 percent of your customers, so looking after them should be your primary focus. It’s not always exactly 80 percent or 20 percent, (it could be 90/10) but the proportions are what we’re talking about here.
On the Menu:
- 80 percent of your menu items will give you 80 percent of your sales, and about 80 percent of the items will give you 20 percent of your sales. Look closely at the best and worst sellers, and simplify.
- At the same time, 20 percent of your menu items will give you about 80 percent of your profits — what are they and could they do with some more promotion?
- 80 percent of party menu sales are from 20 percent of what’s available — can some of those prices be increased?
Food & Beverage Costs:
- On a spreadsheet, list the weekly total cost of each food item purchased. Now use the ‘sort’ function to list them from highest to lowest value. Chances are you’ve got expensive seafood, beef and protein up the top — are these 80 percent items being stored and counted as carefully as they should be? Are you getting the best price possible?
- Probably 80 percent of kitchen prep time is for 20 percent of the menu, and vice versa — what’s your example?
- If 20 percent of your wine and beverage list gives you 80 percent of your sales, check the need to keep so many different labels, especially as it usually involves carrying expensive stock.
Staff and Managers:
- 20 percent of your wait staff probably make about 80 percent of the sales — are you looking after them?
- 20 percent of your employees will cause 80 percent of your staff problems — who needs to move on?
- A small number of your managers may receive a large proportion of the wages — are they producing corresponding value?
- Some managers spend 80 percent of their time on ‘busy work’ and fussing, while others can get the same work done in much less time. Do you have the calm, productive and efficient managers you need?
- Effective managers spend a lot more time working out ‘why’ and ‘how’ and ‘what’s next’ instead of constantly reacting to daily turmoil. The 20 percent of their time they put aside for this has a big, big payoff!
- 20 percent of POS keys are used for 80 percent of sales — are they in the most accessible place?
- 20 percent of the agenda items in a meeting can take up 80 percent of the time — can you improve on this? It’s no wonder people can get frustrated!
- 20 percent of tables are where 80 percent of customers want to sit — can you improve the less popular ones?
- 20 percent of your opening hours generates 80 percent of your sales — how is that reflected in the roster?
Great news: staff really ‘get’ the 80/20 concept, and like finding ways to apply it. Give them examples, and ask them to find their own. This is putting 80/20 at work — a small idea can have a big, big impact!