Pareto Principle : 80 20 Rule
As many of you well know the Pareto Principle, or the 80-20 rule, affirms that 80% of the effects come from 20% of the causes. For example 80% of what you wear each day is, in actuality, comprised of only 20% of your entire wardrobe. Same thing with the items you may use in your office, and the groceries you eat in the course of a week, and the colleagues you email during your work day. In all cases, 80% of the items you use are only 20% of all of your options.
In business the Pareto Principle translates to 80% of your profits and income are generated by 20% of your clients. This “rule of thumb” breakthrough was discovered by 20th century Italian economist, Vilfredo Pareto. The most striking part of his discovery was that the largest amount of wealth was not necessarily distributed to the smartest individuals, but rather the most progressive people who were doing things differently.
You may be asking yourself, “How does this principle REALLY effect me?” After all, you understand the general concept of the 80-20 rule, so what else is there to get? Well, think about how you apply the 80-20 rule in your daily life, and how you allot your time to each activity you perform every day. If you begin to spend a little more time on the activities that produce the MOST income for you, and less time on the tedious, not-so-important activities, don’t you think your income would multiply several times over? The answer is YES!
What you need to do to start is to make a list of all the events and activities that you put time into each day. Then prioritize them in order of Most Income Producing activity to Least Income Producing activity. Figure out which ones MUST be done by you because they require your natural talent, creativity, or authority and which ones you can PARTNER on or OUTSOURCE. This is key.
Let me give you an example. Let’s say your business has twenty-five activities that you’re responsible for each week. We’ll put a monetary value on some activites—let’s say sales brings in $120,000 a month, marketing $120,000 a month and the others bring in $60,000 in total per month. Given the 80-20 law, don’t you think you’d want to focus on those two activities to blow revenue out of the water and outsource the others?
While you put your time and effort into the major activities, there are other assistants, family members, interns, colleagues, etc who are excellent at the smaller-end and administrative activities that need to be completed. You could also look into a virtual assistant and outsource projects online. You don’t have to feel like you carry the weight of everything on your shoulders. Just ASK for help.
The discipline for you comes in managing your time and making yourself follow the schedule you set. While focusing on the high-revenue generating activities, you cannot allow yourself to fall into the email trap, or coffee break and water cooler rest. Test yourself to see if you’re on track by asking, “Is what I’m doing right now moving me closer to my goals and generating revenue?” Sometimes it helps to have a cut out of that question posted in your office. This way it visually triggers you to stay on track.
Bottom Line: If you realign your attention and work on the most business impacting, revenue generating activities, then you should have no problem multiplying your income within the first 30 days of applying the Pareto principle.
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