Insight #14 - Applying The 80:20 Principle

The Pareto Principle as postulated by Vilfredo Pareto in 1906, and later popularized by management guru Joseph Juran as the 80:20 Rule, has profound ramifications for business. The concept in a nutshell is that 80% of your results typically come from 20% of time and effort. It’s an extraordinary principle that has hundreds of applications. Here are just four that may be relevant to your business:

> 80% of your profits come from 20% of your sales
> 80% of your profits come from 20% of your products
> 80% of your profits come from 20% of your efforts
> 20% of your clients account for 80% of your grief

An extremely effective tool for profit improvement is to look for the 80:20 relationships in your business and then focus your attention on the highest priority tasks and opportunities that will deliver the high performance results that you need for maximum profits with minimal effort.

This principle applies to all aspects of your business from client and prospect segmentation, to time invested in products, services, staff, and operational tasks that may not be generating the high margin return on time that you require for maximum profitability.

Tip #14: Apply 80:20 thinking to everything you do in order to identify the top priorities that will most rapidly move you towards your goals and provide the highest return on investment of your time. Don’t let the little things that create busyness get in the way of the important tasks that will build your business and profits.

Work smarter – not harder. Focus your efforts on the premium marketing and sales propositions that will really pay off. Spend more time growing the high margin 20% of your clients. Exercise the discipline of looking for the 80:20 payoffs in every aspect of your business and you’ll be amazed how quickly your profits increase and your workload decreases.