March 14, 2022

The Pareto Principle

This principle can also be used in management in general. If you have a laundry list of task that need to be performed, rather then starting at the top and working down, spend some time analyzing and marking the most strategic income generating efforts (20%) and allocate 80% of your time to work on these. While the vast majority of the list may still remain intact, the items that will generate the most revenue for your business will be taken care of.

Another helpful tactic is to do a periodic review of your client list and assess who is making up the bulk of your sales. A review should map out a fairy close 80/20 ratio being 80% of your revenue derived from 20% of those clients. That then allows you to make some decisions: Do I fire the bottom of the list? Do I make some additional efforts to grow the laggards? Or do I focus 80% of my time and attention to the top 20%? When you take the time to put together and perform a rational analysis, great results can be accrued.

How about applying this principle of one’s personal life? Absolutely. Use it as a daily time management tool by keeping a log of your day to day activities and then analyzing where your wastage is. You will come to find that nearly 80% of the actual productivity activity comes from 20% of the days work. And again, by doing this analysis you can figure out what 20% of your efforts actually do make a difference and how to fine tune them for maximize results.

Success does not come over night. As I stated before using the Pareto Principle should help you maintain perspective that 80% of the time you may strike out, but you only need the remaining 20% to hit the home runs. In my career I have been part of hundreds of not thousands of new product launches. And quite frankly, many of those products were duds. The ideas never panned out or it was just the wrong time and wrong place for the product to truly live up to its potential. But the handful of launches that I did have success on were absolute blockbusters and generated an exorbitant amount of revenue. The Law of the Vital Few when broken into numbers would show it took a winning rate of 20% for me to actually persevere in the game of business when the bulk majority fail. This is why persistence is so important. Ray Kroc, found of McDonalds, at the age of 52 once said the following:

“Nothing in this world can take the place of good old persistence. Talent won’t. Nothings more common than unsuccessful men with talent. Genius won’t. Unrecognized genius is practically a cliche. Education won’t. Why the word is full of educated fools. Persistence and determination alone are all powerful.”

So keep the Pareto Principle in mind as you move through the natural gyrations of life and business. You never know when that twenty percent will hit, and when it does, it will be a grandslam.

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