How The 80 20 Rule Can Highlight The Time You Waste And Profit Your Lose In Your Business.
I’m sure you’ve heard of Pareto’s Law or the 80 20 rule.
But are you aware of its significance for your micro business?
Let me explain…
Pareto’s Law states that (roughly) 20% of a given factor is vital whilst the remaining 80% is less important.
And in terms of your business, this has serious implications you need to get your head around.
That’s because, in practice:
- 20% of your time will produce 80% of your productivity.
- 20% of your customers will result in 80% of your sales and profit.
- 20% of your effort will generate 80% of your results.
- 20% of your website will produce 80% of the conversion.
- 20% of your staff will cause 80% of your problems.
- 80% of your competitors (who you watch) are doing it all wrong.
- 1% are super successful
- 4% are doing very well
- 15% are growing and getting there
- 60% are just getting
- 20% are struggling or failing
You see, Pareto’s Law is not just a statistic, it actually plays out in your business everyday. It may not be exactly 80% 20% but the principle is true
And if you’re truly committed to saving time and making more money, you need to embrace this concept and make it work to your advantage.
To help, here are 3 simple tactics you can employ now to make Pareto work hard for you…
1. Know your numbers
If 20% of your services, products or customers generate 80% of your profit, you need to know what they are. Otherwise you’ll end up wasting time and money promoting and marketing the wrong goods or to the wrong market. If your business offering is simple, you may instinctively know your 20%, but if your range is more complex, you’ll want a more sophisticated method of identifying your most profitable sellers.
Business Management Tools (like SpinLessPlates) usually have easy to run reporting tools that enable you to quickly identify your star products and customers. Then once you’re clear, you can take action.
Perhaps you can streamline and remove the poor performers. Maybe you could explore adding a premium range to your most popular lines or target your marketing to a tighter niche. The key is this insider information empowers you to take firm control of your bottom line – and the end result is you really could work less and earn more. If you don’t know your numbers, you can’t play the game effectively.
2. Woo your 20%
20% of your customers will generate 80% of your profits.
And smart business owners not only know who these customers are, but they make an extra effort to keep these people happy. In your 20% you’re likely to find the people who don’t buy on price and don’t unjustifiably complain. They’re the people who stick around, who refer you to others and give you glowing testimonials. These customers add stability to your business because they want to work with you.
If you can’t identify these people, you’re really missing a trick. Worse still you risk losing them to your competition. Instead shower your top 20% with extra attention. Even better explore ideas to strengthen your relationship, analyse who these customers really are and spend your time (and marketing budget) trying to acquire more of the same.
And if you don’t know who your 20% are, it’s time to crunch the numbers and work it out (I know a small business tool that can help you do that!). Your long-term survival depends on it.
3. Spend your time wisely
Pareto’s Law applies to your time too. That’s because 80% of your results will come from 20% of your time invested.
If you want to make things happen, you need to apply the 80 20 Rule to your time management. You can do that through your daily Power Hour. Remember to make it count by planning in advance what you’ll work on and focusing on your top priorities. For example choose activities that will help you find and keep those 20% of customers mentioned, or spend time understanding your numbers.
Do this before you do anything else in your business day and you’ll know you’ve delivered real results before the inevitable day-to-day stuff takes over.
Running your own business is hard work. What’s more, it’s very easy to get dragged into the ad hoc pressures and forget to take a strategic approach to your future. So keep Pareto’s Law close as a reminder to focus your attention in the right places.
And here’s a final though…
In the 80 20 of your industry, which segment of the below are you in?
I know where I am, what about you?
What are the 80 20 results in your business and how do they affect your plans for your business? Please let me know in the comments below.
Hi, I'm Paul.
Husband of Michele, daddy to Isabella and Jemima, owner of over excitable dog Ben.
I developed SpinLessPlates to be the easiest to use, most time saving B2B micro business management software in the world. If you'd like to save tonnes of time managing your B2B business, simply click here to find out more.