Jul 12, 2021

Leveraging the 80/20 Rule in Your Life and Business

Imagine: you’ve just spent 5 months developing a new set of marketing tools for your business. Each tool required a substantial investment of time and money, and they’ve now been operational for a couple of months—so the results are coming in.

Ideally, each of these tools would connect you with your audiences and move the needle for the business. But of the 10 tools you incorporated into your business, only a couple are actually performing well. In fact, closer analysis reveals that 80% of new leads are coming from just 2 of the new tools.

Don’t be disappointed—the other 8 marketing tools weren’t necessarily a waste of time. You’re just experiencing the latest version of something known as the Pareto principle (aka the 80/20 Rule).

What Is the Pareto Principle?

The Pareto principle gets its name from a man named Vilfredo Federico Damaso Pareto. Born in Paris in the mid-1800s, Pareto greatly enhanced our understanding of economics and social science. Perhaps his greatest contribution, however, is purported to have come from the humble origins of Pareto’s garden.

“Legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods,” explains small business expert Kevin Kruse. “This observation caused him to think about uneven distribution. He thought about wealth and discovered that 80% of the land in Italy was owned by just 20% of the population. He investigated different industries and found that 80% of production typically came from just 20% of the companies. The generalization became: 80% of results will come from just 20% of the action.”

Perhaps you’re not a gardener, so you’re not concerned about where 80% of the best pea pods are coming from. Fair enough. But the idea of a vital few producing the greatest yields has also been observed in everything from business to hobbies to technology. So this matters to you.

What Is the 80/20 Rule in Life?

Entrepreneurs can never have enough time in a day. There are all manner of demands on the business side of things plus the responsibilities to family and self-care. So where do you put your emphasis?

The Pareto principle suggests that 80% of the results you’re seeking are tied to 20% of the work you’ll do. Rather than be dismayed by this imbalance of input and output, you should consider it a powerful way to refine your efforts. Doing so can work wonders for your productivity.

For example, a freelance graphic designer might find herself struggling to manage the simultaneous burdens of pitching clients, completing timely work, sending out invoices, and collecting payments. After reviewing her client list, the designer discovers that she earns 80% of her money from only a vital few of her clients.

Drawing from the 80/20 rule, she could focus her efforts in order to see better results and make her life easier. First, she could devote more time to her 4 biggest clients. Next, she could identify 2 other clients that have the potential to become highly profitable. Finally, she could stop chasing the smaller, scattered jobs from the remaining clients.

By focusing on the vital few, this designer will be able to establish smoother processes and avoid time-wasting efforts.

Applying the 80/20 Rule to Your Business

There are plenty of ways that the Pareto principle can improve your business operations. You might find that 80% of your sales are tied to 20% of your products. Or perhaps 80% of your new customers are the result of 20% of your marketing efforts.

You’ve got to find out what’s working—and maximize your efforts based on that knowledge.

“The temptation always exists to try the new and exciting,” says Kruse. “There’s nothing inherently wrong with that, but it boils down to your goals. Are you trying to grow your current business? Would an 80/20 mindset help you to stay focused on your strategic plan and spend less time chasing endless new opportunities? No matter what your situation, it’s important to remember that there are only so many minutes in an hour, hours in a day, and days in a week. Pareto can help you to see this is a good thing; otherwise, you’d be a slave to a never-ending list of things to do.”

Of course, there will always be required duties that don’t bring the biggest results—but you should look at how you’re spending your time and then ruthlessly remove any dross.

Most likely, you already have a hunch about what needs to go—and this is where the principle attributed to another long-deceased European thinker, William of Ockham, comes into play. Known as Occam’s Razor, the principle suggests that the simplest explanation for something is more often than not the best one. So if an aspect of your business doesn’t feel productive and worthwhile to you, it probably isn’t.

You aren’t duty-bound to many of the aspects of your business and personal life that seem to be consuming effort and yielding little in return. Evaluate them using the Pareto principle and then find ways to make improvements. In this way, you can make life more enjoyable—and take firmer control of your destiny.

About the author

Grant Olsen
Grant Olsen
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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