Using the 80/20 Rule to Improve Your Business

Every business owner wants to be successful. However, at some point, you’re likely to become overwhelmed with everything you need to do. You will eventually come to a point when you need to take a step back, and decide which things are most important for you to focus on — and which you need to worry less about.

The Pareto Principle

One of the ways for you to decide what to focus your efforts on is to use the Pareto principle. This principle is also known as the 80/20 rule. This rule was developed by an Italian economist named Vilfredo Pareto. He made the observation that 80% of the land in Italy was owned by 20% of the population. Pareto also looked at his garden yield for inspiration, discovering that about 80% of the peas he grew came from 20% of the peapods.

Basically, in business, the Pareto principle is the idea that 80% of your results are going to come from 20% of your efforts.

While this distribution doesn’t always hold true, and while there are some flaws in this way of thinking, the 80/20 rule can provide you with guidance as you start to figure out where your business priorities should be focused, and what you can do to improve the effectiveness of your efforts.

Using the 80/20 Rule in Your Business

When using the 80/20 in your business, it’s all about figuring out where you are most effective, and then concentrating on those areas.

Figure out which “vital few” customers are responsible for a large portion of your sales. Many freelancers find that a few of their regular clients are responsible for a large percentage of their income. Once you figure out which of those clients are most responsible for your business success (or at least figure out a profile to describe the type of customer that is likely to be a member of that vital 20%), you can focus more of your attention on those types of clients. You’ll spend less time on unprofitable clients, and improve your efficiency and your bottom line.

The same principle applies to the activities that you complete for your business. There is a good chance that you spend too much time on trivial business matters, or mundane matters that others could handle. The reality is that you are probably more productive if you concentrate on the more important “big picture” items that may feel like a small part of your business, but still accounts for generating most of your positive results. Once you identify the most impactful things you can be doing for your business, you can delegate or outsource the less-important minutiae. This will give you the ability to really put your best effort into the things that are more likely to help your business grow.

You can also use the 80/20 rule to figure out how to use your time. Probably about 20% of the hours you work account for 80% of your productivity. Rather than working long hours just to work long hours, try to identify your times of peak productivity. If you work best in the morning, do the most important work then. When you work best at night, that’s when you focus your efforts. If you can apply this rule to your working hours, you might even be able to work less and get more done overall.

Once you start seeing how you can leverage small amounts of time and effort to see large results, you’ll be amazed at what you can accomplish.