Tag: 80/20

Pareto Principle or the 80/20 Rule

If there is one law that I apply over and over, all day long, to whatever I possibly can in my life, personal or business, it is the genius of Italian economist Vilfredo Pareto and his brilliant 80/20 rule or Pareto Principle which simply states that 80% of the effects come from 20% of the causes.

The basic idea here can be seen everywhere:

  • 80% of your sales probably come from 20% of your products
  • 80% of your revenues probably come from 20% of your clients…20% of your clients probably also give you 80% of your headaches and probably not the same 20% that drives revenue
  • 80% of the wealth is held by 20% of the population
  • You probably wear 20% of your clothes 80% of the time
  • 700 common words make up 2/3 of everyday conversations
  • Who are the 20% of your acquaintances that make you the 80% most crazy

You get the idea. Sometimes it can be way more extreme than 80/20 and you need the right balance. Having 1 customer that drives 95% of your business may feel easy, but not when they disappear…look at all the companies that have supplied Apple in the past that they have laid to waste when they changed suppliers.

Think about how you apply this to your day, every day…

  • Focus on what to improve: Break your problems down and focus on the items that particularly move the dial…layer on resources to really make an impact. 80% of your effort on the 20% that really get things moving
  • Focus on what to remove: Look at the 5% of things that are not working in your business or your life…there is always 5% that can be cleaned up and may make you 20% more efficient or 90% happier!
  • It’s not 1 to 1: realize that to improve by 50% doesn’t necessarily mean a 50% bigger effort, maybe a 5 to 10% increase in methodology can easily turn into a 50% return…talk about creating separation from your competition in a hurry

…some things you cannot change that easily, but just identifying your strengths & weaknesses will help you better cope. Try channeling Mr. Pareto more often and 80/20 your way to more success, freedom, and happiness!