, , ,

Ratios and Multipliers in Business

Recently, I was reading an article in IndieHackers where a member sent out a landing page for an idea hoping to lean on sign-ups as a proxy for interest. With good interest, he would continue to chase the idea. However, he didn’t receive any sign-ups or feedback. He was stuck and was looking for feedback. One commenter pointed out the 90/9/1rule of contributors.
  • 90% of the web is made of consumers (“lurkers”).
  • 9% will contribute occasionally, not often.
  • 1% contribute to most of the web. This can apply to social networks, sign-ups, etc.

There are many ratios that have developed over time in business. These are not hard-fast rules. Instead, they are general observations much like the golden ratio in nature or pi. Here are a few other rules.

  • 80/20where 20% of “xyz” contributes to 80% of some result. In consulting, I used to find ~20% of product SKUs contributed to 80% of the company revenue.
  • 10/10/100from a sales leader panel about terminating a sales associate for poor performance/ poor fit. As a sales leader, you’re only aware of 10% of the whole problem. The fear of addressing the problem is 10 times the reality. And these problems are typically solved 100 days late.
  • 10xis commonly referred to as the net benefit needed for a prospect to switch to a new solution as a “must-have”. A venture capitalist (VC) once told me you have to be at least 5x better/ improvement to even be remotely considered.

What are some other ratios you’ve heard of? (Outside of financial ratios.)