Put the 80-20 Rule to Work for You

Make a PlanIt’s surprising how many areas of life and how many disciplines fall subject to the 80-20 Rule, also known as the Pareto Principle, named after the Italian economist, Vilfredo Pareto. Hardly a week goes by that I don’t read or hear a reference to it.

The last five business books I’ve read go into pretty good detail on harnessing the power gained by being aware of its benefits. This is what I’ve learned, so let’s take a look at your situation.

First step: analysis

Take a look at your business. For me, as a solopreneur, everything project- and client-related falls on my plate. For you, there may be vast wiggle room to delegate or outsource. To be transparent, I’m still working on how to do any of that, but since I’ve positioned myself as a quality and integrity brand, it’s very difficult for me to loosen the reigns on anything. But, nevertheless, take a look at your operations.

  • Does 80% of your revenue generate from 20% of your clients?
  • Does 80% of your e-mail load originate from the same 20%?
  • If you concentrated on 20% of your to-do list, would things keep on trucking?
  • Are you stressed out over only 20% of your projects, clients, or tasks?

Those are the things to look at: load, stress, profit, revenue, expenses, etc. The key metrics of your business should fall in line with the 80-20 rule… let’s say 80% of the time. That makes sense, so let’s go with it.

Second step: trial period

Try, for one week, one area of your business and concentrate on the 20%. Whatever that area is, either neglect the other 80%, delegate to others, refer to others (work out a commission or a flat rate for a win-win-win), or handle them much more quickly than the primary 20%.

After that week is over, re-analyze the data and look introspectively at yourself and the state of your organization. If it’s not in better shape after that week, ditch the trial, resume business as normal for a week, and try another area of your business.

Rinse and repeat.

Rebuilding your current plan

After you’ve looked at all of the areas of your business that you want to improve, come up with a plan to make the trial period changes more permanent. For some that will include a new hire or fire (I’ve been on the business end of an 80-20 firing in my younger years). There is also outsourcing e-mail support, fulfillment, and many other service.

Remember that not all major improvements necessarily mean major changes. One example of that is Chris Brogan’s 7-day challenge to get more done.

For my business, the immediate realizations were that 80% of my steady repeat business comes from 20% (or fewer) of my clients. I’m talking about work every few weeks or months or complete redesigns every year or two. I could nearly survive on those 20% if I was proactive and made myself available to help them in more areas of their business using my services.

As a result, I’ve become very picky about new clients because my current top 20% clients are already top-notch.

Resources

There are three books I’ve read on the subject in 2012 that will help you work on a new plan and course for your business and life.

I highly recommend Tim Ferriss’ book, The 4-Hour Workweek for tips on delegating and outsourcing. While it had a lot of scenarios that didn’t work for my situation, he and I are both writing to a broader audience — and I will be putting some items into action.

The second book I most recommend to improve your day-to-day business activities by way of finding your peak products or services and your best clients is Michael Port’s book, Book Yourself Solid, which also comes with a 90+ page downloadable workbook to follow along and vastly improve nearly everything about your business. Prepare to be pumped up.

Lastly, on this subject I recommend Your Brain at Work by David Rock. He goes into great, yet simple, detail on how we hijack our own day by trying to multi-task, work when we’re least efficient, and much, much more.

Discussion

What have you learned about your business by evaluating it through the lens of the 80-20 Rule? How’s that working for you?

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  • Chris

    Perfect timing Jesse.

    ”ve been working on my own WordPress business ideas and have begin to read Richard koch’s book on the 80/20 principle.

    What sort of analysis do you do? Spreadsheet? Guestimation?

    • http://www.petersenmediagroup.com/ Jesse Petersen

      Good question and thanks for asking. I do a mixture of guesstimate and solid numbers. I use Freshbooks for invoicing, so I can see which clients have ongoing or multiple projects per year, see who accounts for the most revenue, and have a very strong awareness of who creates the most e-mails.

      Out of the 55 sites I host in my account, 20% of that is 10 sites and that’s spot on how many are on-going vs stable and happy. I don’t want to dump those 80%, but it’s the 20% who would be most likely to increase since they have already stepped over the barrier to using me as a regular resource for their business.

  • Greg

    Well written Jesse.
    I’m always looking for ways to be highly efficient and effective while keeping a balance in all areas of life. I’ll give the books you suggested a read through.

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