Use the 80/20 rule to grow your business

By Anne Bachrach

A.M. Enterprises (The Accountability Coach)


If your business is not growing, you need to get a handle on the way you’re running it. Many business owners tend to spend a great amount of time performing unnecessary tasks that contribute little to the growth of the business.

The 80/20 rule, otherwise known as the Pareto Principle, teaches that only 20 percent of your actions should lead to 80 percent of your results. Get a handle on your business by putting the 80/20 rule into effect and identifying high payoff tasks.

The 80/20 rule (Pareto Principle) explained

Developed in the early 19th century by Vilfredo Pareto, an Italian economist, the Pareto Principle was used to explain why only 20 percent of the population was responsible for 80 percent of the country’s wealth. It was later, in the mid-1900s, that the theory of the Pareto Principle was modified by Dr. Joseph Duran. When applied to cause and effect, he theorized that 20 percent of actions (cause) would produce 80 percent of the end results (effect). Because Duran’s theory expanded on Pareto’s original version of the 80/20 rule, Dr. Duran’s theory soon became known solely as the Pareto Principle.

What the Pareto Principle means for your business

The 80/20 rule can be applied to pretty much any situation, but it is especially beneficial when applied to a business (especially if you’re currently a one person show). The 80/20 rule isn’t just another ordinary time/business management method; when used effectively, it holds the power to drastically increase your income and free up valuable time, allowing your business to grow.

Maybe this means that you can cut down on staff or weed out tasks that are completely unnecessary by setting up an automated system. Perhaps it means that it is time for you to hire an assistant or virtual assistant to whom you can delegate low-priority tasks. Using the 80/20 rule to identify the high payoff tasks within your business and automate the low-priority or non-income driving tasks will allow you the freedom you need to grow revenue.

Identify the high payoff tasks

For the purpose of putting Duran’s theory into context, let’s say that 20 percent of your employees are responsible for driving 80 percent of your sales, or 20 percent of your clients make up 80 percent of your product or services sales revenue.

To grow your business and success, it’s vital that you closely analyze your business model and examine which 20 percent of your actions are accountable for 80 percent of your results.

Put the 80/20 rule into action by focusing in on specific tasks that will result in driving sales and revenue. Instead of relentlessly marketing your business to new clients, focus more of your attention on up-selling to your existing clients. It takes as much as 10 times the effort to get new clients to purchase from you as it does to up-sell to an existing client.
Review your product and service sales for the past two years. If you have products or programs that are consistently not selling, close them out at a reduced cost or completely discontinue them. Identify the products or services (usually 20 percent of your stock) that consistently sell and then focus your energy on driving more sales to more clients.

If you’ve received client feedback, let’s say, on an e-book you wrote, the instinctive solution would be to either address each inquiry individually or release an updated version of the e-book, free of charge. However, you can easily turn the situation into a high payoff task by keeping the feedback or questions in mind and addressing them in a completely new series of e-books. Remember, the Pareto Principle is about doing more with less effort. You already have the issues to address, all you have to do is put it in information form.

The other side of the Pareto Principle

You may assume that you only need to address the productive side (the 20 percent), but the tasks that fall into the unproductive 80 percent must also be addressed. Administrative tasks like answering phones and emails, bookkeeping, setting up your website and monitoring it, and pushing papers should certainly not fall into the hands of the executive in your business (that’s you).

Not to say that these tasks should be eliminated from your business model, because they are essential. The difference is that they must be delegated so you can focus on the high payoff tasks and set your business up for growth. Hire a virtual assistant or employee to take responsibilities for the tasks you can’t and shouldn’t do.

If your business is struggling, you can use the 80/20 rule to identify high payoff tasks. If you are currently working 10 hours or more each day, put the 80/20 rule into action to finally take back control of your life. By doing so, you’ll be able to move past the fruitless tasks that make up 80 percent of your business and take up most of your time.

Here are some resources for finding virtual assistants to help you in applying the 80/20 rule to your business:

Elance.com or Guru.com — Freelance communities bringing buyers and providers together

AssistU.com — Virtual assistant website popular with entrepreneurs

Ivaa.org — The International Virtual Assistant Association: find certified VAs through their member directory.