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The Pareto Principle, also known as the 80/20 rule, is a concept that states that roughly 80% of effects come from 20% of causes - which means that 20% of the things that you do are actually responsible for 80% of the outcomes.
This principle was first discovered by Vilfredo Pareto, an Italian economist, in 1896. Pareto observed that 80% of the land in Italy was owned by 20% of the population. Later, this principle was applied to various fields, including business - and I can promise you this: If you start examining your numbers you will most likely find that this also applies in your business and life at large.
<aside> 📒 If you’re reading any business or marketing terms in here that are confusing to you, feel free to look them up in the glossary that I’ve made. This is linked from within every single blog post to make sure you can understand the content even if you’re new to business and marketing - Find the Glossary here.
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The Pareto Principle will impact your business in many ways. If you start digging into your numbers, you will find that
It literally applies in pretty much every area of your business.
So, knowing this exists is one thing. We’re all about taking something away from this and applying it to our life and business. So here are some ways in which you can apply the 80/20 rule in your business.
You also know that I love data, because we can only build a successful business if we’re looking at our numbers. So, go through your finances and identify your 20% of your top customers - once you look at the amount of revenue these people generated you will probably find, surprise surprise that this is 80% of your revenue.
So, who are these top customers?
Ask yourself questions about them, about their businesses or their lives, or the work they do, where they found you, how you connected with them etc.