How to simplify your business by focusing on what’s most important.

Complexity destroys profitability…And ROIC, cash flow, on-time delivery, lead time, inventory levels, and all your other KPI’s. The solution? Simplification.

Simplification starts with the 80/20 Quartile analysis. It reveals where your complexity lies—and, where you should focus and simplify.

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Keep in mind, segmenting your business into quartiles is just an analytic step — a chance to see everything through an 80/20 lens. Quartiles alone, while revelatory, will not change your business.

Six Easy Steps

  1. List your customers in descending order by annual sales. The customer who provides the highest annual revenues will be at the top, and the lowest at the bottom.
  2. Divide the list into quartiles. For example, if you have 200 customers, divide the list into 4 groups of 50 each. The top quartile is comprised of 25% of your customers producing your highest annual sales.
  3. Total the revenue for each quartile and put that in the next column.
  4. Calculate each quartile’s percentage of your total revenue and put it in the third column.
  5. Determine the percentage of effort it takes to support each quartile and put it in the next column. Most companies can assume 25% across the board.
  6. Calculate the profit percentage for each quartile and put it in the final column.

After you finish your quartile analysis of customer revenues, do the same thing with any products you make, the services you offer, lines that you represent and resell, and even your vendors.

Don't hesitate to reach out if you need help with your quartile analysis, or if you want some guidance regarding the next steps. Strategex has a team of 80/20 experts (with decades of experience) who are happy to help. Plus, we can provide an Excel template for you to run your data, or we can do it for you.

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The quartiles are a foundational tool in Strategex’s 80/20 toolkit. It is a simple, quick analysis of a company's customers and products in terms of the revenues they generate. The results can be calculated quickly and are easy to understand.

80/20 methodology is the key to success for many top-performing Fortune 1000 companies. Strategex’s 80/20 experts are a qualified team of business veterans, many of whom were involved in the genesis of 80/20 as a business philosophy. To date, we’ve delivered over $300 billion in continued operating income improvement.