CBL Episode # 116 The 80-20 Rule: Transforming Your Cleaning Business with Pareto's Principle

Pareto's Principle might sound like dry economic theory, but it's actually one of the most powerful tools cleaning business owners can harness to transform their operations and profitability. In this eye-opening conversation, we dive deep into how the 80-20 rule (first observed by Italian economist Vilfredo Pareto in 1896) applies specifically to cleaning businesses today.

Ever wonder why some cleaning companies struggle while others thrive with seemingly less effort? The answer often lies in recognizing that 80% of your results come from just 20% of your inputs. We unpacks how this manifests across every aspect of your business—from discovering which clients truly drive your revenue to identifying which marketing channels actually deliver customers.

The most fascinating (and perhaps uncomfortable) revelation? Your legacy clients—those who've been with you since day one—might actually be your most expensive relationships to maintain. We challenge the emotional attachments that keep you tied to underperforming accounts with a simple thought experiment: "If you broke your leg tomorrow, would these clients continue paying you while you recover?" The answer reveals the true nature of these business relationships.

Beyond client management, we explore practical applications of the principle to marketing, time management, service offerings, and team building. You'll learn why specialized add-on services (like $35 sheet changes) can be gold mines, how to identify which 20% of your efforts produce 80% of your complaints, and why building a truly scalable cleaning business requires recognizing these patterns.

Ready to work smarter rather than harder? Listen now to discover how to analyze your business through the Pareto lens and make strategic decisions that dramatically increase profitability while reducing unnecessary work. Your future self—and your bank account—will thank you!

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Chapters

• 1:46 Introduction to the 80-20 Rule
• 3:34 Marketing and Revenue Distribution
• 5:43 Client Relationships and Referrals
• 9:24 Analyzing Your Top 20%
• 12:49 Handling Legacy Clients
• 19:17 Building a Scalable Business
• 24:18 Optimizing Services and Add-Ons
• 27:59 Implementing the Principle Effectively

Transcript

Speaker 1: 0:54

welcome back, jamie, long time no see very totally. For those of you guys who don't know, we actually crammed down several episodes in one day, so usually by the third episode we're like red leather, yellow leather.

Speaker 1: 1:17

So you'll have to forgive us, but I wanted to talk a little bit about the 80-20 rule, which is also known as Pareto's principle. Vilfredo Pareto, I feel like I should have the enunciation of the Italians with the hand gesture, if you guys are not watching. This was first observed in 1896, that 80% of Italy's land was owned by 20% of the population in Italy, and this is way before Mussolini. The principle has since then been applied to a wide range of fields, including business, time management, finance and productivity, and at its core, it highlights the imbalance of inputs versus outputs. So a lot of the things you'll see a common pattern, and it applies to the cleaning industry as well. What are your thoughts on this, ms Jamie?

Speaker 2: 2:06

It does Whenever we go down through the applications of how to incorporate or watch out for, you see, this principle, this pattern arise in your business. Just before we came on, we were actually talking about marketing, because that's a big thing. We have to market ourselves. You absolutely have to market yourself if you want to be bigger than what you are ourselves. You absolutely have to market yourself if you want to be bigger than what you are. That word of mouth only goes so far. Only you know delivering exceptionally well services, blah, blah, blah.

Speaker 2: 2:47

But I found it interesting why we were. You know I was looking this over because I did. Whenever I was asked, I was asking Shannon, what is the 80-20 rule? You know what is that? And whenever I started studying it a little more, it's true, it incorporates into our business Like 80% of our revenue comes from the 20% of marketing efforts and that's so, that's just and that's exactly what it is. 80% of your leads comes from 20% of advertising channels. But there's a bunch of other things that I'm learning, right along with everybody else how to incorporate the Pareto principle, which is the 80-20.

Speaker 1: 3:43

It's also known as the 80-20 rule, to add on to what Jamie was saying. It says 80% of word of mouth referrals come from 20% of satisfied customers. I cannot tell you how true that is, and you've all heard me talk about the one client who I wanted. I forced her to have a price increase and then when I looked at the hard costs of what this person brought to the table, I wasn't looking at the whole picture and I really regretted doing it after. So what happened is I came across a business coach and I'm like I'm changing everything and I started to make changes rapidly because I wanted. I had paid all this money and I wanted all these changes.

Speaker 1: 4:20

What I didn't see was how many people this person had referred to me because she thought I was a wonderful person and in the end she didn't think I was a wonderful person. She thought I was a total snot and I ended up losing that referral base. But that was just one out of I don I don't know how many, because I really thought about it. I felt really I had had a long term relationship with this individual as a customer. We live in a small town, we all know what that's like, and I shot myself in the foot over that and in reality, in retrospect, I probably would not have done it that way. I would have done it a different way and we won't go into all of the details of that. But it really is true that 80% of your efforts come from 20% of your clients.

Speaker 2: 5:05

Right, yeah. Well, this is wealth, your world. It says 80% of the world's wealth is controlled by 20% of the population.

Speaker 1: 5:19

I think that's actually even less, and we won't get into the global nomics and all that other stuff, right.

Speaker 2: 5:24

But even back here it says the misconceptions of this principle is it's not always going to be exactly 80-20% Correct and it suggests a common pattern in real life distributions. It could be 70, 30, 90, 10, and even 95, five right, yes, and the key takeaway of that is the imbalance and not the exact ratio.

Speaker 1: 5:56

Correct. Yeah, so does it mean that you can ignore the 80%, while the 20% of your efforts might drive the most success? Neglecting the 80% completely would lead to missed opportunities. You never know when the next opportunity will hop over to that 20% and then maybe you'll have 21% instead of 20%. So you don't want to clear the table, so to speak, and go.

Speaker 1: 6:19

I'm not going to spend any time with these people because I'm not going to make any money off of them. Those actually can be referral partners and we talked about that with our interview with Ron about how he develops his referral partner program with the vodka and the other attributes that he gives away at Christmas time. So you just never know, and that person could just be a referral partner and not your actual customer. So always try to spend quality time where it's necessary, but always it's those relationships. We say it over and over and over again it's the relationships you develop going through all of these things going to the chamber meetings, going to the networking events, engaging with people personally, not hiding out in the closet because you don't want to deal with anybody, but developing those relationships, because I legitimately have showed up to chamber meetings and made 7,000 bucks Cause they're like you're that cleaning lady? And I'm like, yeah, how can I help you like?

Speaker 2: 7:17

you're that cleaning lady and I'm like, yeah, how can I help you? That too, you know it opens up when you are out there rubbing elbows with people, and rubbing elbows is is communicating and branding. That's basically branding. You're branding your business. When you're out there rubbing elbows with people, doors start opening up for you. I cannot tell you how many people get a hold of me to do trade for services, for you know we're trying to set up for commercials, for billboards, for billboards for now I'm sponsoring again my son's little league baseball team and because of that, another place asked me hey, would you mind if you would? Can you clean, can your company clean the restrooms and we'll give you some advertising, free advertising. Heck, yes, I'm all about it. So I love that. That's whenever. More than just.

Speaker 2: 8:29

This rule applies to everything. You need to look at your specific data to see where your ROI or your KPIs, your key performance indicators, are, and you need to start analyzing that data so that you can make these business decisions. So that you can make these business decisions. But, first and foremost, get out there, and it comes from getting out there and be in the face of your business, right. So see now where this comes into play in our businesses and, yeah, how you need to analyze that and look at that and make good professional business decisions and become a true business owner.

Speaker 1: 9:27

Yep. So you would have to sit down and look at your P&L, but that's your profit and loss. If you're not familiar with what that word is or what report I'm referring to, and we won't go into the bookkeeping element but you would have some sort of bookkeeping put in it's input output and then you would determine. So you would sit down and, like I've talked about this in the Black Friday Bonanza it's you know you take, if you have 100 clients, usually the top 20% are the ones that actually get the Christmas gifts because they're generating the most revenue. When you have $100,000 clients, when you have $200,000 clients, those guys are going to get Christmas gifts. And then the middle of the ranking of your clients are going to get either a gift certificate or a free oven cleaning, and then the bottom they just might get a card and a thank you. It just depends on what you're doing. Like castlekeeper cleaning, everybody got a christmas card and they were hand signed and there were 450 of them at the time.

Speaker 1: 10:24

Um, and you know you've talked about my mental block about having christmas cards since my brother died, but we won't go there either. So, um, identify who your vital few 20, who are your top 20 clients um actions, 20 of actions, clients and efforts generate the most success. So you need to focus on them. You need to focus on the whole picture. But if you're really wanting to develop a referral program, I would definitely do what Ron does and I would start a referral program. What can you do to refer me, to get this prize right? Whatever it is, it doesn't have to necessarily be alcohol. I'm just using that example because it was easy to remember. Yeah, right.

Speaker 2: 11:06

And then go ahead. No, no, no, I'm just saying and people love their alcohol. Wow, Everybody's given a bottle of wine. A bottle of wine, Right?

Speaker 1: 11:19

totally, then you need to eliminate and reduce the trivial many. So you guys have heard me talk about your lowest paying clients are the most expensive ones to keep, and it's not because I'm being mean and these are also known as legacy clients. You're not gonna make any money off of your legacy clients. I talked to someone the other day and she's like well, these clients have been with me from the beginning and I said let me ask you, if you were to break your leg and you had no one else to work your shifts for you, would your legacy clients stick around? She was quiet. The reason why she was quiet is because she didn't think those clients would continue paying her while she was on the mend from her broken leg. So it's a business transaction we are. Yes, you can have friends in this business. Yes, you can become friends with your clients, but it's a gray area and you never want to overstep in case something unpleasant happens. I broke my leg. I'm not going to come for eight weeks. Are you going to hang out? Can you pay me to? All right? Right, so you have.

Speaker 1: 12:28

You have to think it's true, your most, your cheapest clients are the most expensive ones to keep. I believe there's a YouTube video on that somewhere on my channel and you have to also give them a price increase as well. Don't be shy with giving. They need to get used to it. They'll never be a current market value, but they need to get used to having a price increase. Don't hold the line because they were loyal to you. These guys are not going to be loyal to you. When the next hot cleaning company comes to town and they're offering 10 bucks cheaper, they're going to jump more than likely because it's a budgetary thing. You're looking at clients that are going to have $200 tickets or more on each and every clean.

Speaker 2: 13:04

That's the reality of what you need to do to operate well, I mean, yeah, and absolutely, there's some people that pay $400, you know, it's just. And the one that's 400 is way out there and it's like, hmm, and then the one that's 300 weekly is right here in town and it's like You're starting to weigh it out. Yeah, you start looking at it like wait, this person is paying the and it's a legacy client, so, um, and I think about for later for sure.

Speaker 1: 13:49

But yeah, it's, it's something to consider. So you would want to um determine which are going to be your top 20%. Um, you want to reduce or eliminate the ones that are not making you money. And I'm not saying you have to clean the table off all at once. You can do one or two. They'll eventually drop off when you become too high priced. And then you want to delegate or automate. And I don't want and I know I'm really against this and I've said this before we cannot automate everything in the house cleaning industry. We're still very human based.

Speaker 1: 14:47

You cannot make this like fast food. Yes, there are things that we could do to automate, like our CRMs and our digital calendar systems Love, love, love them. But you can't. You can't go. You can't make it like going to Del Taco where you order at the kiosk, have absolutely no engagement with the one token employee in the back, that you can't see, that you don't know what's going on. We're hoping that it's being made, you hope it's being made and that there's not any cross-contamination going on. So you want to try to figure out how to. It says here on the paper. It says if 80% of the issues come from a small set of repetitive tasks, delegate them to a team member and then automate them and we talked a lot about this, too, with Sarah, whose interview is coming up soon is we, as business owners, should only focus on tasks that are making us money?

Speaker 2: 15:39

Because that's what we're in this for Right. I'm sorry, but you know I want you to tell me that.

Speaker 2: 15:46

I know, katty, would you want me to give you the Hallmark version? I listened to that the other day. That was great. But yeah, you're going to have to do some of these things and they are going to be uncomfortable, but, like you said, you got to get on. People primed and pumped, expecting oh here comes my price increase. It's that time of year that, above all cleaning services does price increases a little bit at a time. Somewhere is around here.

Speaker 1: 16:27

Definitely. And then you also need to optimize time management. You hear a reference that you know the mom schedule between you know drop off and pick up and it legitimately. Depending on what school district you're in, it's either a six or a seven hour window and everything has to be done in blocks of time. I cannot emphasize that enough. I could not accomplish what I do in a week if I didn't plan out my week and I didn't work in blocks of time. So you have to be able to do that to make things work. And then you know business and productivity. You know 80 percent of the company's profits come from 20 percent of its customers. It's kind of reiteration 80 percent of the business sales come from 20% of its products or services. And that's very true.

Speaker 1: 17:10

If you guys looked at the pricing, why am I having a brain fart? Pricing the blueprint yes, thank you. The pricing blueprint masterclass Told you. This is number three. I make a lot of money off that course. I made a lot of money off of it when it was first launch. I made a lot of money off of it when it was a hundred dollars. I still make a lot of money off that course. It's because it's my number one seller. I sell that course more than any other course that I offer, and I have legitimately have 55 digital products. They're not always available. They get rotated in and out depending on what I'm doing and what I'm working on. So that's very much true. 80% of the company's complaints come from 20% of its clients. So which customers are giving you a hard time? Right Clients is the client who will only air quote have you, even though you want to transition out and work on your business instead of in it. Think about that Like true, like observations.

Speaker 2: 18:16

Oh, that's a hard one, I can. I can relate to the audience right now whenever they're sitting there like, oh, I have I, nobody else can do this but me. And that client really is like I want you a really hard pill to swallow.

Speaker 1: 18:37

It's a hard, nerve wracking transition. It always is because, again, we go back to the we're women, we're emotionally based and they're like well, this person was really loyal with me. I want to, I want to make sure that I stick by them, loyal, loyal, loyal, loyal, loyal. And in reality again I I brought up the example of the broken leg. If you broke your leg, would your legacy client stick by you and pay you while you were gone?

Speaker 1: 19:00

right no, the reality is no, they're not here to look after you. You the whole point of all this craziness and I know I say this a lot you're building a legacy that you can either sell at another date or gift to your family and earn an income off of it for the rest of eternity. For as long as house cleaning is necessary, that could be a source of income for you. They just give you owner's draw every three months. I mean, there's a lot of potential with these cleaning businesses. So this is the reality of Pareto's principle. Let's see, we talked about the economic and then marketing and customer acquisition. Jamie already mentioned that, and I believe I would just focus on what really matters. Sit down and look at where you're earning most of your income. You should be able to name where you're earning. When you have a hundred thousand dollar client, that client takes precedence. You don't ever miss those, those cleanings. You'll show yourself and clean it just to make sure.

Speaker 2: 20:02

What do you need? Yeah, oh, there was a hair. Let me grab that Right, drive over myself and get it. So what do you need? Yeah, oh, there was a hair. Let me grab that Right, drive over myself and do it. I will.

Speaker 1: 20:11

Right, and even before you know, I've had cleaning techs make comments about things they saw in someone's house and then I ended up losing like a $40,000 client. I'm like what made you think that you would not be fired for that?

Speaker 2: 20:38

I just ate 40 grand or yeah, uh, yeah, I've had. Sometimes it's also okay to um, if that person, uh, is bringing in that bread and butter and you lose it over something like Shannon just said, I would evaluate the person that you know. That's hard, that's hard to, and I've had it happen myself. I've had it happen myself and it just like wolf. I just lost thousands a month from and it just takes some off-handed remarks.

Speaker 1: 21:16

So and again, you know we've talked a lot about a lot of topics, but making sure that you're training your cleaning techs on what to say and what not to say, what's appropriate, what's not appropriate, um, and we've all had the clients where we get there and it's like a therapy session. I'm like we should be paid twice as much at least for the therapy. That's the reason why you should wear earphones, right? Because then you don't have to listen to whatever, because they will just tell you every explicit detail, all of the things that have happened in their life since the last time they saw you, and you're like, wow.

Speaker 2: 21:48

Yes, and then you'll have some people that'll just sit there and talk and talk with the and it's like, okay, this we got to go.

Speaker 1: 21:57

Right, that might fall in the 80% because that person, it's not scalable. You're going to send someone else in there. Is that person going to keep on working? You just keep on spitching, right? Yeah, yeah.

Speaker 2: 22:12

We got some talkers.

Speaker 1: 22:15

Definitely so. That is the general synopsis of the Pareto principle. It's also known as the 80-20 rule. Look at your systems in place, see what's working, what's not working. Look at your clients, see where your highest paying clients are. Figure out how you're going to get more higher paying clients. And that goes back to branding, what Jamie had mentioned Branding. Branding, branding your reputation is everything. Providing customer service. What is your customer experience? Do you have a good customer experience or is it really kind of meh Right? And then optimizing your services. Having add-on services.

Speaker 1: 22:51

I mean, you guys hear, you guys see me in the group all the time and people argue with me over like I can't believe that's what you charge for a sheet change. I physically have two people drive around right now because I just brought it back from COVID who changed 10 to 15 beds a day. That's all I do is drive around right now because I just brought it back from COVID, who changed 10 to 15 beds a day. That's all I do is drive around, change sheets. It's 35 bucks a whack. It's a great little side hustle. I split it 50, 50 with them 15 minutes. Then you just have to coordinate. It's an.

Speaker 2: 23:17

It's a great and that and that. Again, that's where the jobber comes in great at, because you can, it sets it up for you like, okay, okay, you're going to send them here, here, here, here, here, here, here is your, here's your map for the day. Yeah.

Speaker 1: 23:37

And I'm hoping to have on more sheet changes. I live in a senior based community and they can't do it anymore and they willingly will pay the 35 bucks that's per bed. So if it's a bunk bed it's 35 bucks each one. It's not, you know, and nobody likes to change bunk beds ever 60, but I and that's kind of a deterrence who?

Speaker 2: 24:00

please don't ask me.

Speaker 1: 24:01

Right, that's why we charge so much for oven cleanings and refrigerator cleaners. I don't want to spend the time doing it. It's time consuming, it's tedious. I can't tell you how many times the cleaning tech has called me in a freak out because they didn't take a photograph of it before they're trying to remember how to put it back together, oh yeah.

Speaker 2: 24:18

Those are hard, those are hard, but yeah. So I am going to probably hang this on my wall and I myself am going to really look a little more into as soon, probably as soon as we get off of here I got a little bit of time before I have a doctor's appointment I'm going to look and make sure that I'm using this principle to my advantage in my business. So, um, I'm learning right along with everybody else, um, and I like, I like the, the podcast, like this too, because it's like, oh, I get to learn, I still get to learn all the cool stuff that we offer to everybody else, definitely just to know that, um, I don't know everything, obviously, and, um, I'm learning right there with you guys, and that's why I like these kinds of podcasts. So it feels like the old days, whenever we were doing Zooms for your Structure Scale Profit Cleaning Academy.

Speaker 1: 25:37

That was like years ago, five years ago. It seems a long time ago.

Speaker 2: 25:42

I don't know why ago yes we used to.

Speaker 1: 25:46

Before I actually had a DIY course. I, we did them live. You had to show up to the zoom. I'm laughing. It was like so utterly ridiculous, but you have to show up to the zoom. And there was a replay and we did a total old school Like I, before I had an actual platform to sell a digital product, I hand delivered that product to you off of my phone. So if I was in Costco shopping with my kids I would stop what I was doing and I'm like, oh, this person just purchased that and I just drop it into you on messenger.

Speaker 2: 26:22

And I remember whenever you were like I'm working on a whole digital product, I'm like I couldn't, I couldn't wrap my head around, but that was great. There's good times, good times, and so I'm just saying that I, I, I, that's that. She's dropped it a couple of times in youtube.

Speaker 1: 26:54

Oh, there, there, I am right totally, but the structure, scale and profit cleaning business. I believe there's 35 hours of content in it. So, um, and there's all the stuff being added in because I think it's relevant, and sometimes I take stuff out, um, but yeah, it's a total DIY. You don't have to wait for Shannon and show up for the zoom in the middle of the day because I'm in Arizona most of you guys are in the middle of.

Speaker 2: 27:17

America around the east coast yes, it ended up working out so much better. Uh yeah, good times, yeah For you, but um, I am. I. I'm gonna look at this right now, whenever we get off of this, because I'm so interested in it. You know I was looking at it probably five minutes before we got on here, like even asking. I skimmed it a little bit but I had to ask Shannon what is the 80-20 rule? Totally, and so.

Speaker 1: 28:01

So his name is Villafredo Porto. That's my best impersonation of Italian.

Speaker 2: 28:14

And look how long ago it was. You know this principle 1896. I love that. I love that you found this and have incorporated. I don't know, helping all of these cleaning business owners like this is just. We need more of you out there.

Speaker 1: 28:38

Yeah, that's what we're doing, definitely Well, it was good to see your face. Have a good doctor's appointment. We'll talk to everyone. Take care, bye, bye.