What you NEED to know about the 80/20 rule

December 31, 2013

Sometimes you wonder, why do I work so hard? Most of the time, most of us won't take the time to stop what they are doing for one moment and wonder if they are doing it right.

 

The Pareto principle became famous in business and states that, in general, in life, roughly 80% of the effects come from only 20% of the causes. In a nutshell, in a company, 80% of the sales come from 20% of the clients, which could be also rephrased by "80% of the output comes from 20% of the input."

 

The distribution appears in several different aspects relevant to entrepreneurs and business managers. Let's list a few examples of the 80/20 rule in business:

  • 80% of a company's profits come from 20% of its customers

  • 80% of a company's complaints come from 20% of its customers

  • 80% of a company's profits come from 20% of the time its staff spend

  • 80% of a company's sales come from 20% of its products

  • 80% of a company's sales are made by 20% of its sales staff

  • 80% of a company's products produce 80% of sales​

 

HOW YOU CAN OPTIMIZE THE EFFICIENCY OF YOUR BUSINESS

 

If you are not producing the results you desire, change your strategy and refocus your energy on the 20% of activities that will produce most of the results. Many businesses have an easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or retraining the rest, as appropriate.

 

HOW YOU CAN BECOME A SUPERSTAR

 

You must focus on the 20% that matters. Of the things you do during your business day, only 20% actually matter and they produce 80% of your results. You must identify those things. 

 

Once you have identified what makes 80% of your results, you can start working on increasing the time you allow every day to these tasks. The most challenging part of this job is to cut the 80% of the tasks or projects that are unimportant or don't contribute to the end goals.

 

This does not mean of course that you will work 80% less. Actually, you will spend 100% of your time at things that used to represent only 20% of your time. And that is the key to your success.

 

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