80/20 Rule for Your Business

We’ve all heard of the 80/20 Rule.  The 80/20 Rule means that in anything a few (20 percent) are vital and many (80 percent) can be trivial. Business owners know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources.

This works in your personal life as well.

·         80% of your music selection comes from 20% of your iTunes selection.

·         80% of your television viewing comes from 20% (or less) of your channels.

·         80% of your experiences comes from 20% of your friends and family.

The same for us here at the TSBDC, since 80% of the TSBDC’s economic results comes from 20% of our clients.

Some quick background: The rule of 80/20 was first stated by Italian economist Vilfredo Pareto, so the rule is also known as Pareto's Principle. Pareto observed that 20% of the Italian population owned 80% of the wealth.

I witnessed the 80/20 Rule while growing up and working in our family-owned furniture store.

·         80% of our inventory came from 20% of our suppliers (lots of Lane and Ashley stuff.)

·         80% of the advertising results come from 20% of a campaign (everyone wanted 90 days same as cash.)

·         80% of our customer complaints come from 20% of products (we once tried to sell lawn mowers…..bad idea.)

The concept is that just a few things are responsible for the majority of your productivity.  Just imagine if you apply that to your business.

For example:

·         If 80% of your business’ results come from 20% of your employees, you need to find a way to reward and retain that 20%.

·         If 80% of your revenue comes from 20% of your customers, you need to find more customers like that.

·         If 80% of your customer service is spent on 20% of your customers, i.e. you may need to let those customers go.

·         If 80% of your sales come from 20% of your marketing efforts, you may want to find a way to expand that particular marketing strategy.

You get the concept. The important thing is to take notice in your business which 20% of functions are responsible for 80% of your success.