The 80 20 Rule
Using the Pareto Principle to Increase Productivity

One of the newest rules of marketing that has been emerging in popularity is the 80 20 rule. It is also known as the Pareto Principle and has enjoyed more thanks banks to well-known books such as The 4 Hour Work Week.

You can do a simple Internet search that will yield gobs of information and details, but I will give you the basics here to get you familiar with the concept. You will see how by applying the 80 20 Rule to your own small business will give you the potential to both make and save you a significant amount of return on your time investment.

At the most basic level, this Pareto Principle asserts that in what ever you do, 20% of your efforts will yield the 80% of your results. This is approximate of course, and there is no hard or fast guarantee each time, but the typical application of this results oriented principle will be:

  • 80% of your profits will come from 20% of your clients
  • 80% of your sales will be from 20% of the sales team or marketing effort
  • The 80% of service issues result from only 20% of clients
  • 80% of employee work performance will yield 20% productive

Take a bit to comprehend this and consider its implications on your own small business. Did you get an "aha" moment when you realized that these results actually describe some or all of your own results?

Now, let's move to five ways of applying the 80 20 Rule and how they will benefit you and your business' bottom line:

    1. Begin by recognizing who exactly is your ideal customer client; you know, those top 20% that give you the most of your profits. Think of new and different ways to get more just like them. By doing so you are now able to be more selective in your marketing efforts. Also, asking for referrals from them will yield more of the same.

    2. There is absolutely nothing wrong by choosing to turn down prospective clients who do not fit your ideal mold. However, do not turn them away without providing value, as you may gain a great referral later. Burning bridges with anyone is not smart business. Even referring them to a competitor will yield goodwill that will come back later to benefit your business. Having a good name in the community is golden.

    3. Do you wish to get a bit more aggressive applying the 80 20 Rule? It may appear a bit radical, the fire the 80% of your client base that contribute very little to your business.

    Doing this will give you more time to attract and service to the ideal, most profitable, and fun clients.

    4. OK, if that is much too extreme, begin with the most painful or trouble causing clients. Through attrition, recommend a competitor is a better fit for them. In return that business will be more inclined to return the favor. A win-win-win situation.

    5. And lastly, look at the inside of your business and its unique processes. Write your own list of where you are able to apply the 80 20 rule to save time, money, and effort. Identify the employee (and your own) tasks, eliminating in the ones that do not produce the most that desired results. Examples are how the phone is being answered to the paperwork filing system being cumbersome and not very effective. Ask the employees themselves what changes would make them more productive.

Applying the 80 20 Rule (Pareto Principle) to systematically improve the way your business functions will increase both productivity and profits. More importantly, a smooth and efficient running organization serves the client and community better, adding value to more peoples' lives then you realize.

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