How To Use Pareto's Principle To Have A Successful Business
Have you ever heard the expression, “less is more?”
According to Pareto’s Principle, 80% of results will come from just 20% of the action.
You may have heard this as the 80/20 rule. They both refer to the same concept.
To sum up the principle in short, an economist named Vilfredo Pareto studied the relation between wealth and population in Italy and found 80% of the land was owned by 20% of the population. He then decided to take this observation further and survey other countries on this matter and found the same results.
The main takeaway from Pareto’s observations was that things in life are not always distributed evenly. This principle was applied to many different areas, such as business and the results were always close to 80/20.
According to Forbes.com, “While it doesn’t always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases:
20% of the sales reps generate 80% of total sales
20% of customers account for 80% of total profits
20% of the most reported software bugs cause 80% of software crashes
20% of patients account for 80% of healthcare spending (and 5% of patients account for a full 50% of all expenditures!)”
So why is this important?
This concept is encouraging you to focus more on the things that matter most, primarily the tasks that help us reach our goals. The idea is that most things are not distributed evenly.
Understanding this principle will allow you to take a look at your business and analyze what areas fill that 20%. Taking a Pareto approach is to truly understand which projects are most important.
Once you analyze your business, stay focused on the 20% that matters.
“What are the most important goals of your business?”
“Which specific tasks do you need to focus on to align with those goals””
Delegate or drop the rest.
As creative entrepreneurs and online business owners, we often feel the need to do everything on our own. But this is often not the best thing for our business. If you apply the Pareto Principle, it will be the best time management technique you can use.
For example, if 20% of your products account for 80% of your profits, more time should be spent on those products within the 20% to increase your overall profits.
I encourage you to take a hard look at your business and find your 80/20 in all different areas.
Take time to evaluate all of your projects and assess your goals.
Are these projects urgent?
Are you wasting too much time on specific tasks?
Does this task help you reach your goals?
Are you the most qualified person for the job? Or, should it be completed by someone else?
If you find yourself spending a lot of time on the tasks that aren’t within that 20% bringing your business the most success, consider delegating these to a virtual assistant or dropping them all together if they aren’t necessary.
Often times you might hear the expression, “ditch your $10 tasks.” Essentially, if there’s tasks that are taking up your valuable time and they are tasks that a VA could do for less than your hourly rate, hire it out.
You are the visionary, the leader of your business, and your time should be spent on the things that are going to push your business forward.
For example, if you’re a graphic designer and are spending a lot of your time doing bookkeeping and admin tasks, you’re not getting the most out of your time. Bring someone on to handle this area of your business so you can spend more time working on graphic design.
Let’s put this concept into action
Go through the many different areas of your business and find out what’s moving the needle and what’s not.
You can analyze your:
After going through all these areas, you may find things such as emails bring in more sales than social media posts but you spend more time trying to get the perfect images to post. You can make the shift to spend more time crafting your email campaigns and less time on creating content for social media because it’s not driving the 80% of profits.
Doing this analysis will really change the way you run your business— but for the better. Take the Pareto Approach and see how many tasks aren’t really needed to move your bottom line.
Leave a comment below and let us know which tasks you were able to drop