If your business isn’t growing, you need to control the way you’re running it. Many business owners tend to spend a great deal of time doing unnecessary tasks that do little to grow their business. The 80/20 rule, also known as the Pareto Principle, teaches that only 20% of your actions should generate 80% of your results. Take control of your business by putting the 80/20 rule into practice and identifying high-performance tasks.
The 80/20 Rule (Pareto Principle) Explained
Developed in the early 19th century by Vilfredo Pareto, an Italian economist, the Pareto Principle was used to explain why only 20% of the population was responsible for 80% of the country’s wealth. It was later, in the middle of the 20th century, when Dr. Joseph Duran modified the theory of the Pareto Principle. When applied to cause and effect, he theorized that 20% of the actions (cause) would produce 80% of the final results (effect). Because Duran’s theory expanded on Pareto’s original version of the 80/20 rule, Dr. Duran’s theory soon became known solely as the Pareto Principle.
What the Pareto principle means for your business
The 80/20 rule can be applied to virtually any situation, but it’s especially beneficial when applied to a business (especially if it’s currently a one-person program). The 80/20 rule is not just another ordinary time management/business method; When used effectively, it has the power to dramatically increase your income and free up valuable time, allowing your business to grow.
Perhaps this means you can reduce staff by eliminating tasks that are completely unnecessary by setting up an automated system. Maybe it means it’s time you hired an assistant or virtual assistant to whom you can delegate low-priority tasks. Using the 80/20 rule to identify high performing tasks within your business and automating low priority or non-revenue driving tasks will allow you the freedom you need to grow revenue.
Identify high-profit tasks
For the purpose of putting Duran’s theory in context, let’s say that 20% of your employees are responsible for generating 80% of your sales, or that 20% of your customers make up 80% of your sales revenue. products or services.
To grow your business and be successful, it is vital that you take a close look at your business model and examine which 20% of your actions are responsible for 80% of your results.
Put the 80/20 rule into practice by focusing on specific tasks that will result in increased sales and revenue. Instead of tirelessly marketing your business to new customers, focus more of your attention on increasing sales to your existing customers. It often takes ten times more effort to get new customers to buy from you than it does to upsell an existing customer.
Review your sales of products and services for the past two years. If you have products or programs that consistently don’t sell, close them at reduced cost or discontinue them entirely. Identify the products or services (typically 20% of your inventory) that are consistently selling, and then focus your energy on driving more sales to more customers.
If you’ve received customer feedback, say, on an eBook you wrote, the knee-jerk solution would be to address each query individually or post an updated version of the eBook, free of charge. However, you can easily turn the situation into a high-yield task by taking those comments or questions into account and addressing them in a whole new series of eBooks. Remember, the Pareto Principle is about doing more with less effort. You already have the topics to deal with, you just have to put it in the form of information.
The other side of the Pareto principle
You might assume that you only need to address the productive side (the 20%), but the tasks that fall in the unproductive 80% should also be addressed. Administrative tasks like answering phones and emails, doing the bookkeeping, setting up and monitoring your website, and sending documents certainly shouldn’t fall into the hands of your business executive (that’s you). It does not mean that you should eliminate these tasks from your business model, because they are essential. The difference is that they must be delegated so that you can focus on high-performance tasks and set your business up for growth. Hire a virtual assistant or employee to take over the responsibilities for tasks you can’t and shouldn’t do.
If your business is struggling, you can use the 80/20 rule to identify high-return tasks. If you currently work ten hours or more each day, put the 80/20 rule into practice to finally regain control of your life. By doing so, you will be able to overcome the fruitless tasks that make up 80% of your business and take up most of your time.
