The 80/20 Rule

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80 / 20 Rule - Marketing ConceptAre you focusing on what really matters?

A few days ago I was having a conversation with a colleague about being able to get it all done. He was beating himself up (naturally) about what he wasn’t accomplishing, when he had just put out an incredible amount of forward-thinking, creative effort that expanded the capabilities of his business to a huge degree.

“Remember the 80/20 Rule,” I told him. “If you’re focusing on what matters, the things that fall through the cracks won’t be that big of a deal. Just make sure you know what matters in your business, and don’t worry too much about the rest.”

What you do doesn’t always = what you get

This started a long discussion of the Pareto Principle, or the 80/20 Rule, which states that, for many events, roughly 80% of the effects come from 20% of the causes.

In 1906, Italian economist Vilfred Pareto noticed that 80% of the wealth in Italy was owned by 20% of the population. He took it further by noticing that in his garden, 80% of the peas were produced by roughly 20% of the pea pods. Later economists have used the principle to show that most of the results in any situation are determined by a small amount of causes.

The percentages aren’t always exactly 80% and 20%, of course, but you get the idea: Most of your progress and results come from a small amount of your actions.

How the 80/20 Rule can affect your business

If you extrapolate this to your business, you might be able to say:

  • 80% of your profits come from 20% of your customers
  • 80% of your profits come from 20% of the time you spend
  • 80% of your sales come from 20% of your products
  • 80% of your sales are made by 20% of your sales staff
  • 80% of your complaints come from 20% of your customers
This means you can stop beating yourself up for not doing everything

100% is not only impossible, it isn’t even that important. What is important to know is this:

What is your 20%?

What are the very top things that really make or break your business?

• If 20% of the time you spend brings in 80% of your profits—what are you doing during that time? (And what are you doing during the other 80%? Wow, maybe a lot of that time isn’t even necessary, if you’re not getting that much out of it!)

• If 20% of your customers give you 80% of your profits—who are these customers, and what are you doing to make sure this special group of customers stays happy?

• If 20% of your products/services bring in 80% of your sales—are you focusing on these? What can you do to highlight them, and make sure more people know about them? Is it possible you may be able to retire some of the other 80% of your products/services that don’t sell as well and take your time away from the 20% that work the best for you?

How can you find your 20%?

If you want to focus on what matters, you’ll need to do some tracking and poking around to find out what these things are for your particular business.

Start with these:

  • list your customers and what they spend with you to find out who are your 20% best customers, and do something to encourage or thank them.
  • analyze your activities and tasks into high pay-off and low pay-off, and track your time to focus on high pay-off activities.
  • discontinue low pay-off activities, or find a way to delegate them to someone else while you do high pay-off activities.
Knowing your 20% helps you be more successful

I’m not advocating letting 80% of your time, clients, or products slip through the cracks—you know that, right? What I am advocating is being aware of your 20% in every category that’s important to you in your business, and making an effort to focus on those. Doing so will help you prioritize your workload, organize your time, calm your overwhelm, lower your stress level—and be more successful.

 

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