You may have heard the principle that all successful entrepreneurs swear by. Here’s how to use the Pareto Principle for your business.
What is the meaning of the Pareto Principle?
The 80/20 rule, or the Pareto Principle, is the idea that 80% of your results come out of 20% of what you do. It was first used in macroeconomics in 1906 by Italian economist Vilfredo Pareto to describe the distribution of wealth. Pareto came up with the principle when he noticed that 20% of the pea pods in his garden were responsible for 80% of the peas. He applied this to economics by showing that 80% of his country’s wealth came from 20% of the population.
Over the years the principle has been expanded upon and used in other areas of life, particularly in business. Although it’s not a scientific formula, it has gathered enough anecdotal evidence to support the principle as being accurate. Many businesses over the years have demonstrated an increase in sales and productivity by using the principle, and the world’s best and brightest have also used it to succeed in their chosen fields.
When applied to business, it means finding the most important tasks (the 20%) to focus on to get the maximum results (the 80%). In other words, it helps you direct your time, energy, and resources towards things that give you the greatest returns or the best results. It helps you work smarter.
As a busy business owner, your time is precious, and you can’t give everything your equal attention. No matter how well you may be able to multi-task, it does you more harm than good as it leads to decreased productivity over time. Click here to read more about managing your time well in business.
This is easier said than done though, because when you have so many things to “do” in your business, or products and services to juggle, or customers to please, how do you find the time to focus on the most important ones?
Secondly, I’d suggest taking an inventory of what you do daily. Separate them into categories. Then under each category, create a list of items and rank them based on importance and how well they help you achieve your business goals. Lastly, focus only on the top 1-3 tasks from each category that gives you the greatest returns and focus on those.
Pareto Principle examples
Here’s an example of how to do your inventory:
Category: Admin tasks
- Make a list of all your daily or weekly tasks
- Which tasks give you the most returns? Pick the top 3.
- For the tasks that give you less return, can those tasks be outsourced? Brainstorm how you can delegate those tasks or remove them altogether.
Category: Social media content
- Which posts are getting the most responses?
- Can you improve upon that content or expand on the same topic and get more traction than you’re already getting now?
- Make a list of all your products or service offerings
- Where does your biggest revenue come from? Which sources comprise the top 20% of your business’ income?
- Can you afford to invest more money in your top products or services?
This will help you identify the product or service that brings in most of your income – it’s what works best for you.
- Which customers make the most purchases from you? Consider their demographics such as age, gender, socio-economic background, etc. This will help you identify your ideal customer or market.
- Can you afford to invest more money and effort in satisfying your top 20% of customers?
This doesn’t mean that you neglect your other customers, but it means you can prioritise your efforts if you feel overwhelmed while still moving your business along.
Asking these questions will help you identify which activities, products, and customers to focus more on, which tasks you can outsource or which products you can remove altogether. It doesn’t mean that everything else is false by the wayside or gets neglected. But it does mean you can prioritise your efforts where they will get the most returns, and delegate or de-prioritise others for when you have time to focus on them.
The key is delegating
The key to becoming successful at what you do is finding what is vitally important to your business, prioritising that, and delegating the rest. That’s it. Take it from hundreds of self-made millionaires, entrepreneurs, Olympic athletes, and other high-achieving people. Focus on that vital 20% — that is what will make your business grow.
If you’d like to out-source your copywriting and content writing tasks, I’d be happy to help. Contact me and let’s talk about how I can help you grow your business.