Tom DuFore: 0:01

Welcome to the Multiply your Success podcast, where, each week, we help growth-minded entrepreneurs and franchise leaders take the next step in their expansion journey. I'm your host, Tom Dufour, CEO of Big Sky Franchise Team, and, as we open today, I'm wondering if you have ever heard of the 80-20 rule. Well, if you're like most of us, you've probably heard of it, but how familiar are you with it? Have you applied it to your business? Well, our guest today is Perry Marshall, and he has become an expert at applying the 80-20 principle to your business and your life Now. Perry is a renowned business strategist, bestselling author and expert in digital advertising. He's known for the Ultimate Guide to Google Ads and 80-20 Sales and Marketing. Perry has consulted across over 300 industries, shaping the $400 billion digital ad space. He's the founder of the $10 million Evolution 2.0 Prize and co-founder of the Cancer and Evolution Working Group. Perry's insights bridge the worlds of marketing, science and entrepreneurship, making him a must-listen for anyone seeking growth and innovation. You're going to love this interview, so let's go ahead and jump right into it.

Perry Marshall: 1:11

Perry Marshall. I'm the founder of Perry S Marshall Associates, author of 80-20 Sales and Marketing, and really glad to be with you today. We're going to have a good time, Absolutely Well.

Tom DuFore: 1:22

Thank you, Perry. Really appreciate you being here and spending some time together. I really wanted to at least get the conversation started, talking about your book 80-20 Sales and Marketing and talking about this 80-20 principle, and let's start there. Let's talk about why write a book about this.

Perry Marshall: 1:40

I thought I understood 80-20 a long time ago when I read some business book. It said 80% of your business comes from 20% of your customers and the other 20% comes from 80% of the customers. And I thought is that right? I printed out a QuickBooks report, I pulled a calculator out of my desk, I went down, sure enough, from top to bottom, 20% of the way down, yep, that was 80% of the revenue. And I go oh, that's interesting. And I thought I understood it and that's what most people understand. Most people have heard this before.

Perry Marshall: 2:18

I did not understand it. I didn't really understand it at all. So at the time I had this customer named Dimitri and his company only ordered a few thousand dollars of stuff every year. It was a very small customer but he would always beat me up about well, you guys don't have this software feature and you don't have that. And I was at a software company and I would always try to like make him happy and he would threaten to leave. And what I didn't realize at the time was this guy's a minnow and you shouldn't get tangled up in that and 80% of your business comes from a few customers and he's not one of them. But I just didn't quite connect it.

Perry Marshall: 3:06

And a few years later I was reading a different book and it said 80-20 has a lot to do with chaos theory. And suddenly my head exploded because that is something that I've studied. That is the science that deals with things like tornadoes and earthquakes and glaciers and cracks in windshields and black swan events. And I go wait a minute. And I jumped up. I was in a coffee shop, I jumped up, I ran home and an hour later I'm laying on the living room floor with papers everywhere, I'm doing calculations and my wife walks in and she goes what happened to you? I'm like I just had a huge realization. My brain melted. So I want to explain. Why did my brain melt? Well, in chaos theory they show you that a crack in your windshield and a crack in the San Andreas fault are the same. You know it could be really tiny, it could be really huge. It's the same process that makes them both. A tree has tiny, tiny little branching patterns in the leaves under a microscope and has a huge branching pattern when you back out and that's called fractal. And what I suddenly realized was 80-20 is fractal. There's an 80-20 inside every 80-20 inside another one and another one. So not only do 20% of your customers produce 80% of your business, 20% of the 20% produce 80% of the 80%, and that goes again and again until you're down to only one customer. So this goes all the way to Jeff Bezos. It guarantees you that somebody in the world is going to have that much money. And what it says is that the inequality where the 80 and the 20 and the 20 and the 80 is baked in.

Perry Marshall: 5:04

It's a law of physics and when I suddenly saw it I couldn't unsee it. It is absolutely everywhere. Most people have never noticed this. In fact, I have a friend who texted me a week ago. He goes. My daughter is about to graduate from major university with a degree in statistics and he goes. I was talking to her last night. She's never heard of the 80-20 principle Degree in statistics, never heard of it. It is the most pervasive thing that nobody ever told you about. It's in your Facebook account. It's in shoplifting. If 80% of the stuff is stolen by 20% of the shoplifters, you'll never eliminate all the shoplifting, but you can eliminate 80% of it by finding two people. It's true of employees and it's true of ad campaigns. It is a total mind shift. It's like putting on a set of x-ray glasses that allow you to see things that you never saw before. It is the most important thing you can learn in business.

Tom DuFore: 6:17

It is a tremendous principle and one I've been familiar with, like you described, but then taking it and essentially duplicating that within itself right these, with like you described, but then taking it and essentially duplicating that within itself, right these branches, as you described, the branches you shared with the leaf, and then the branches and so on, yes, and it applies to almost everything.

Perry Marshall: 6:39

Let me tell you a story. I have a friend who, at age 17, he dropped out of Catholic school in Denver, hitchhiked to Las Vegas and became a professional gambler. This was his fantasy as a teenager to be a pro gambler. So he got a fake ID and he's going around the casino and he's playing poker and about a month into this he's like this is a lot harder than I thought it was going to be. So he goes to a gambling bookstore and he's looking at the books and he starts talking to this guy who's there and he finds out the guy runs a professional gambling ring and his name is Rob. And Rob, do you think you could teach me to do what you guys do? And he says for a percentage of your winnings, I can teach you to do what we do. And so they shake on it Jump in the Jeep, john, we're going for a ride.

Perry Marshall: 7:40

Gets in the Jeep, they're driving down the highway and John says so, rob, how do I win more poker games? And Rob says you need to play people who are going to lose. You don't go after other professional gamblers. You want the 18-year-old from Wichita whose grandma just gave him some money and he's going to go to lost wages and get rich. And he goes well, where do I find that kid? And he goes here, I'll show you.

Perry Marshall: 8:06

And they pull into the parking lot of a strip club. They go in there. There's women, there's music, there's lots of distractions, loud rock and roll playing. Rob sits John down at a table and he pulls a sawed-off shotgun out of his jacket. He holds it under the table and he slams it shut. So it goes. And in the middle of this loud club there's a few people that hear that noise and they're like, what? Like? There's biker dudes over there who made that noise. And the owner comes over the table. What's going on here? It's okay, just teaching the lad a lesson. John, did you see those dudes who turned around when they heard that noise? Yeah, don't play poker with them. They're not marks.

Perry Marshall: 8:57

Play poker with everybody else, and that is what we call racking the shotgun, and that is what we call racking the shotgun, and that separates the 80 from the 20. Everything you do in sales, everything you do in marketing, everything you do in entrepreneurship is racking the shotgun. So, with customers, every salesperson in the world is obsessed with all the people that didn't answer the phone, didn't buy, didn't click on the people that didn't answer the phone, didn't buy, didn't click on the link, didn't, didn't, didn't. What's so easy to forget is that the dids are 16x, the didn'ts Like if you look at 80-20, the top 20 are 16x, the bottom 80. And then there's a top 20 of those, that's 4x, and then another top 20, that's another 4x.

Perry Marshall: 9:50

So I call it the espresso machine principle. For every 1,000 people who buy a $5 latte at Starbucks, one of them will spend $2,700 on a gleaming stainless steel espresso machine. It's a law of physics that if you've got a lot of buyers who buy, you know, for a dollar, there's a few buyers that'll spend $10,000. It's a law of physics. 80-20 guarantees that it's true. A law of physics 80-20 guarantees that it's true.

Perry Marshall: 10:26

And a lot of people don't realize this and they don't understand that the coffee just keeps the lights on and it keeps the customers coming in the door, but all the money is in the espresso machine and a lot of businesses are not what you think they are. 80% of the money in Vegas comes from these people that they call whales, that spend $100,000 on a hand of poker and there's special wings and rooms and suites for those people that the rest of the world doesn't even know exists. And most people don't know that McDonald's isn't really selling hamburgers. They're growing the value of real estate and most smart businesses. There's something behind it. That's not what you see on the front door and that's all. Espresso machine principle.

Tom DuFore: 11:19

As I'm listening to you describe and talk about this, I guess my question that comes to mind is this is great, but if I'm listening into this, how do I apply this to my business? These stories are great, but maybe what's something practical or a nugget from your book that I might be able to apply?

Perry Marshall: 11:37

So if you're advertising on Google or Facebook, 80% of the money is in 20% of the ad campaigns, 20% of the ads, 20% of the keywords. There are huge parts of those that are generating huge amounts of waste. I guarantee it. If you hire 10 salespeople, two of them will outperform the other eight put together. I guarantee you that is going to happen. 80-20 guarantees you it's going to happen.

Perry Marshall: 12:13

Most people try to fix the runts, and not only do they try to fix the runts that can't be fixed, they also annoy the performers. Like you got Charlie and he's an amazing closer and Susie is assaulting him because his expense reports aren't in on time. Well, why don't you get your hire him an assistant to follow him around with a shoebox and pick up his receipts or whatever you've got to do? But don't annoy the guy with that crap and let him perform. There are areas of waste in business 10% of your product line, 10% of your clients, 10% of your employees. You are taping dollar bills to every box that goes out the door and you don't know it. You would make more money if you discontinued that product or if you doubled its price. You're afraid to double the price because you'll offend somebody. Well, you're losing money. It's everywhere and there's never just one cockroach.

Tom DuFore: 13:23

You mentioned raising prices on that product. That's 10 or 20% driving revenue. Are there other practical things you've seen or suggestions you might have for someone that says, okay, I like this. What can I do to analyze this and start making some adjustments?

Perry Marshall: 13:39

There's a principle called the 21-20 rule and it says that 20% of your business makes 120% of your profit. That's the best 20% of your business and the worst 20% of your business loses money. And brings your 120, you would have made down to the 100 that you did make. You have employees who are losing you money. I have a good friend named Nancy Schlesinger, longtime client. She's a recruiter, been in that business for 30 years. She told me a bad employee costs five to 14 times their salary. I thought, oh well, that's got to be an exaggeration. It's probably one or two X and Nancy's just exaggerating.

Perry Marshall: 14:29

Well then, a year or two later, I had to fire a bookkeeper and then, when I had a better bookkeeper, I started finding out what all the mistakes were. There were $50,000 invoices that never got sent out two years ago. Well, how does a customer feel about getting a $50,000 invoice two years later? Does that go over? Very well, that bookkeeper costs you way more. Like that's just one mistake and that's not all the other mistakes. It is absolutely true that bad employees cost you way more. A players attract A players, b players drive away A players and attract C players. That's 80-20.

Tom DuFore: 15:13

Have you applied this just to other areas of your life, just in general? Not just you know running your own business, but where else have you applied this? Just to other areas of your life, just in general? Not just you know running your own business, but where else have you applied this?

Perry Marshall: 15:22

It is true in personal relationships, it's true in science, so it's 80-20 is true of the traffic on the streets. In your town, 80% of the traffic runs on 20% of the streets and 50% of the traffic runs on 1% of the streets. It's true of craters on the moon. It's also true of personal relationships. The top 20% of your personal relationships create 120% of your happiness and the bottom 20% of your relationships create negative 20% happiness. Okay, you have toxic people in your life that you need to get rid of and you haven't gotten rid of them. Because you're not, because you didn't rack the shotgun and decide to do something about it. It's everywhere.

Tom DuFore: 16:11

That's just amazing to think about. Well, real quick, while we're in the midst of this, how can someone get a copy of your book, learn a little bit more about what you're doing, maybe follow what you're up to?

Perry Marshall: 16:22

If you go to perrymarshallcom slash podcast, you can get 80, 20 sales and marketing for seven bucks including shipping. It's about 20 bucks on Amazon. It's got 1300 reviews, 4.7 stars. It will completely change your life and that's at perrymarshallcom slash podcast. And it comes with a couple extra videos that you wouldn't get if you bought it on Amazon. So go pick that up and sign up for my Perry Marshall Minute, which is a daily email that comes out, and it will get you thinking 80-20. I have a whole bunch of 80-20 fanatics that follow me and learn and it just goes deeper. It's like martial arts. You can get a first degree black belt, but you could also get a second or a third or a ninth. How deep do you want to go?

Tom DuFore: 17:15

Fantastic. I love it. Well, Perry, this is a great time in the show. I always like to ask every guest the same four questions before we go, and the first question is have you had a miss or two on your journey and something you learned from it?

Perry Marshall: 17:29

Yeah, about nine years ago I was talking on the phone and I looked through my French doors and my brother was in the next room and he's the president of my company and I live in Chicago and he lives in Nebraska. So I wait a minute. My brother's here unannounced. This doesn't look good. So I finished my phone call, Brian, what are you doing here, Perry? We need to talk. And he goes.

Perry Marshall: 18:01

We have too much overhead, we have too much employees, Our expenses are too high, we need to cut back. And we spent that was like two in the afternoon. We spent until 11 o'clock that night arguing and debating. Well, Brian, we're going to do this and we're going to do that, and I think we're going to be fine, and you don't know how awesome this next thing is going to be.

Perry Marshall: 18:25

Well, about two or three months later, it was obvious he had been right and I had been wrong, and I was now three months further behind on my over-optimism and now I really needed a cut. Now, anybody who really owns a business and has done it for a while and has had to make cuts, knows that when you cut, the improvements do not immediately come, Because you have things like severance packages and stuff like that, and we were laying employees off severance packages and stuff like that and we were laying employees off. And that was really the first time that I learned the subtraction side of 80-20. 80-20,. Go back to the rack, the shotgun story. It's more about who you don't talk to and what you don't do and what product you don't ship out and which employee you don't hire, as much as it is about what you do.

Tom DuFore: 19:23

You can apply it to set boundaries right.

Perry Marshall: 19:25

Yes, and most entrepreneurs that I know are, yes, people. We're optimists and we love life and we love adventure and we're interested in people and we're interested in ideas. And well, you know what? You can't fund all the ideas and you can't hire all the people and you can't invest in all the things that cross your path. You have to be very, very selective.

Tom DuFore: 19:53

Let's talk about a make. Let's look on the other side.

Perry Marshall: 19:56

I had a huge victory a little over 20 years ago, and so now that I'm 55, I guess it's an early victory, but I want to tell it to you because it pertains to right now. So in 2001, in the summer, a company approached the company I worked for and said we want to buy you out. And that was exactly according to plan. We were developing a chip. We had been working on this for three years. The intention was we want to make ourselves attractive. This is what we want. So that was all great.

Perry Marshall: 20:29

So they started doing the negotiations and when it was almost about done, 9-11 happened. And all of a sudden the orders stopped coming in. We're selling capital equipment. Everybody just froze. Sales plummeted. The company's just about to get sold. They're offering me a job. The company's just about to get sold. They're offering me a job.

Perry Marshall: 20:57

And, especially given how scary the world was, it seemed extremely attractive to take the job, even though the job offer wasn't really that great. And my wife says take the money and run. No, and go start the company that you've always been talking about starting. And I'm like she goes, no, I'm serious. And I asked around and this one lady said to me Perry, the time of maximum uncertainty is maximum opportunity. Now is the time to make a jump. And again, remember, 9-11 has just happened. People are driving around with flags on their cars and the planes aren't flying and conferences are canceled. And I decided she was right and all the other employees thought I was crazy and I jumped out and I started a consulting business.

Perry Marshall: 21:55

A year later, the founder of the company I worked for he had become a vice president at the company that took us over. He hated his job. He didn't get along with anybody Very common, by the way, when buyouts happen he ended up leaving and kind of having a little fight about it and the new company was a train wreck and I escaped all that. Meanwhile, the world was just starting to shift from employee world to freelancer 1099 world and I had made that jump at the exact right time in a year. Well, it wasn't even a year later that I was happy about it. It's actually three months later. I made the most money that I ever made in a year.

Perry Marshall: 22:35

Well, it wasn't even a year later that I was happy about it. It's actually three months later. I made the most money that I ever made in a month, which at that time was $12,000. I'm like, dude, like this is like six figure territory and I'm what? And like, no matter what happens, I still think back on that of what, how good it was that I took that advice. And I bring that up now because right now feels like 9-11 to me in the world, but it's a different 9-11. It's not a this one thing happened, it's a. There's 1,700 things happening and everybody's arguing about them and debating them and a lot of people are frozen and they're scared and they're hiding under rocks and they're just not really doing anything. That is the wrong thing to be doing right now. Right now is major opportunity. It doesn't look like it, it is.

Perry Marshall: 23:41

Let's talk about a multiplier that you've used to multiply yourself, your organization, any business you've run, the best multiplier is know thyself is know thyself, know thy strengths and weaknesses, and I have my own version of this. In the 80-20 book there is a link to take what we call the marketing DNA test, and it is a test that measures how do you sell and persuade as compared to anybody else in the room. And the reason I made this test was, first of all, early in my sales career. I bombed badly. Two years of bologna sandwiches, ramen soup, baked potatoes and salsa is really cheap, by the way Really cheap and I didn't know it at the time. But I was trying to be somebody. I was not People. I would admire them and they were on stage or they were on tapes or books or videos. I was trying to be like them and I didn't understand no, how do you sell? And then, later on, I got more successful and I started consulting.

Perry Marshall: 25:03

I've worked with thousands of entrepreneurs and sales and marketing people and over and over I've seen people try to shove a square peg in a round hole. Maybe they're a really good negotiator and they're killing themselves trying to make a YouTube channel. Or maybe they're a really good copywriter and they're trying to be a social media diva or whatever, if you can figure out what your strengths are. Those are huge multipliers. If you're a really good writer, the best investment you can make is to go to a writing class the right one and get even better. It's not. Oh, I'm going to go to. I'm going to learn how to run video cameras. Now, because YouTube is popular is now, because YouTube is popular, people get on these bandwagons and they don't value what they bring. That is a huge multiplier, I think.

Tom DuFore: 26:04

for sure, most of us go through that, or some of us get stuck in that and find different versions of that as we go through life. So I think that's a great, great multiplier there. Well, the final question we ask every guest, perry, is what does success mean to you?

Perry Marshall: 26:21

I think success means if you got a terminal diagnosis, you wouldn't change very much of anything that you're already doing. You know, we've all heard the stories of you know, my life flashed before my eyes. What am I doing? What am I up to? Totally changed my priorities. I think success is you don't need to change your priorities because you already got them figured out.

Tom DuFore: 26:47

That's powerful, very, very powerful. Well, as we bring this to a close, perry, is there anything else you were hoping to share or get across that you haven't had a chance to yet?

Perry Marshall: 26:57

I think that if you think things are choppy now, just wait a little while. 2025 is going to be a choppy year, and that means it's going to be increasingly tough for people who are hanging on to whatever the way things were, because I think normal just went out the window. I think there is no normal. You need to let go of your notion of normal. There is big opportunity in embracing the new and the strange. In hindsight, there is no question that 9-11 had a lot of opportunity in it. There's no question that COVID had a lot of opportunity in it and we could go over that in detail that would be a whole other conversation but we can all agree that those opportunities existed and that most people didn't seize them. And so how are you going to do this different than most people did the last couple of scary times in life? That's what I want to leave you with, because the future belongs to the bold.

Tom DuFore: 28:06

Perry, thank you so much for a fantastic interview, and let's go ahead and jump into today's three key takeaways. So takeaway number one is just about the 80-20 rule in general and how Perry talked about. He didn't really truly understand it until he had this connection point with the chaos theory and how he saw it can be applied to every industry and every area of life. Takeaway number two is how he's talked about applying it to your own business. For example, looking at your Google ad spend and Facebook advertising and looking at probably 80% of your keywords and spend is not producing the kind of results you're looking for, that it's the 20% that's driving most of your results and keywords, et cetera, and he gave another example of how it may be applied to your salespeople or to your profit in your business. Takeaway number three was just applying it to your life in general or personal life, and he said, for example, 80% of the traffic likely runs on 20% of the streets and, thinking about your own personal relationships, that you're probably your top 20%. The top 20% of your relationships generate 80% of your happiness.

Tom DuFore: 29:22

I thought that was a really unique way to think of it, and now it's time for today's win-win. So today's win-win comes from the tail end of the conversation. I thought this was a great little nugget that Perry shared with us. He said with the changing environment that we're in, he said, think about the new opportunities that are in front of us and it got me thinking okay, well, how can we apply this 80-20 principle he was talking about to new opportunities for your business or for your personal life in this changing business climate that we're living through? So that's the episode today. Folks, please make sure you subscribe to the podcast and give us a review, and remember if you or anyone you know might be ready to franchise our business or take their franchise company to the next level. Please connect with us at BigSkyFranchiseTeamcom. Thanks for tuning in and we look forward to having you back next week.