The Thirty Who Pay the Rent

Dear friend,

The riddle first, as ever. Your century today, and the sum at the heart of it is one that every business owner half knows and almost none has done.

Two yards serve two hundred names,
Same stock, same prices, same fair aims.
One treats them all exactly so,
One knows the thirty, and lets it show.
By spring, one's turnover has gone.
Which yard was fair? And which lived on?

Hold your answer. Story time.

The Story

Two timber yards in the same district, and the stock, all together now, was equally good. Each had about two hundred trade accounts, and each would have told you, honestly, that they treated every customer the same.

The first meant it as a principle. First come, first served. Nobody jumped the queue, nobody got a better price for who they were, the telephone was answered in the order it rang, and when the good oak ran short in a dry summer it went to whoever asked first. He was proud of this and it was, in its way, decent.

What he had never done was look at the two hundred names against the money. Had he done so, he would have found what every business finds when it finally looks: about thirty of the two hundred accounted for most of the year, and about a hundred of them accounted for almost nothing at all, and the two groups were receiving identical attention. A builder who bought eleven thousand pounds of timber a year waited behind a man buying a fence post, on principle.

And the thirty noticed, in the way that people notice being unremarkable. They did not complain, since nothing was wrong. They simply had no reason to think of him as their yard rather than a yard, and when a rival opened across the river and one of them tried it, there was nothing in the relationship to make the trying feel like a betrayal.

By the following spring he had lost nine of the thirty, which was a third of his turnover, and still had all hundred of the men buying fence posts.

The second yard had done the sum, once, on a wet afternoon, and it changed how the place ran.

She knew the thirty by name and by van. The good oak, when it was short, was held for them first, and they were told so. Their calls were answered by whoever was senior, and their orders went out on the first lorry. Twice a year she visited each of them on their own sites rather than waiting for them to come to the yard, and once a year, in December, she sent something that was not a calendar.

None of that was secret, and none of it was unfair to the hundred, who got precisely the good service they had always had. The thirty simply got more, because they were more, and everybody in the arrangement understood why.

When the rival opened across the river, two of her thirty went to look, and both came back within the month, since the rival was cheaper by a fraction and treated them as two accounts out of two hundred, which is what they had just left.

The Lesson, Since You've Earned It

Treating every customer the same is not fairness. It is a decision to give your best customers your average attention. In nearly every business a small share of the customers produces most of the money, and the instinct to serve everyone identically means that share is subsidising the attention paid to the rest. The builder buying eleven thousand pounds a year is not the same as the man buying a post, and pretending otherwise does not honour either of them.

So do the sum, which takes an afternoon and which almost nobody has done. Set every customer against what they spent last year and find the line below which the money stops mattering. Above it will be a number you can know by name, usually somewhere between a dozen and forty, and those names are the business. Everything below the line is welcome and should be served well, and none of it should be allowed to consume the hour that belongs to the names above.

Then let it show, plainly and without secrecy. The best customers should know they are your best customers, because knowing it is most of the value. First call on scarce stock, and told so. The senior person on the telephone. The visit to their site rather than the wait for theirs to you. The thing in December that is not a calendar. None of this costs much, and all of it converts a supplier into their supplier, which is the only position from which a rival across the river cannot poach you for a fraction.

Two cautions. This is not a licence to be rude to the man buying a post; he gets the good service he always had, and some of them become the thirty. And the sum must be redone every year, since the thirty change, and a customer who was a name three years ago and has since faded is a separate letter and a separate afternoon.

Three questions, and the first is an afternoon with the ledger:

1. Who are your thirty? Every customer against last year's spend, sorted. Draw the line where the money stops mattering. Most owners can name half of them from memory and are surprised by the other half, which is why the sum is worth doing on paper.
2. What do they get that the rest do not? If the honest answer is nothing, your best customers have no reason to think of you as theirs, and the rival across the river has an open door.
3. Do they know? Not in a vulgar way: in the plain way of being told the oak is held for them and being visited on their own ground. Recognition unspoken is recognition wasted, and the whole value is in their knowing.

The Answer to the Riddle

Which yard was fair?

Both, by their own lights, and only one of them was still trading at the same size the following spring. The first served two hundred people identically and lost the thirty who were paying for it, because nothing in the arrangement distinguished them from the man with the fence post. The second served two hundred people well and thirty people particularly, told them so, and kept them when a cheaper yard opened across the water. Equality of attention is a pleasant idea. It is paid for by the people who can least afford to tolerate it, and they leave.

The verse:

Two hundred names upon the book,
And thirty pay the rent.
Serve all, but take a second look,
And let the thirty know it's meant.

Until next time. Go and set every customer against last year's money this week, find your thirty, and decide what they get that the rest do not.

P.S. The sum has a second use, which is the uncomfortable one. Somewhere near the bottom of the list will be a handful of names that cost you more in hours than they bring in money, and the same afternoon that finds your thirty will find them too. What to do about those is the laundress's letter, and it is easier to write once you can see the thirty it would free your Mondays for.

Also in the archive: The Farrier's Fortieth Shoe, The Cooper and the Single Gate and How Many Pints Were Drawn.