The Pareto Principle: Where’s That 20%?
In 1906, an Italian economist named Vilfredo Pareto observed that 20% of Italy’s population received 80% of its income.  He later noted that 80% of the peas in his garden came from 20% of the peapods.  
 
Just as Pareto began to see an 80/20 ratio everywhere he looked, you can start to look for examples of it in your business.
 
  1. •    Do 80% of your customers produce only 20% of your revenue?
  2. •    Conversely, do 20% of your customers produce 80% of your revenue?
  3. •    Do 20% of your products or salespeople produce 80% of your revenue?
  4. •    Are 80% of your management problems caused by 20% of your employees?
 
There are lots more places to look for this ratio in your business: for instance, how do you spend your time?  Do you spend 80% of it on tasks that are going to produce only 20% impact on your bottom line?  What would happen if you spent 80% of your time on that 20%, instead of the other way around?  What would happen if you spent 100% of your time on that 20% and forgot the other 80%?
 
The whole point of the 80/20 rule is not to use it as a hatchet to chop off parts of your business; it’s an awareness that helps you focus your resources -- marketing dollars, personnel, etc. -- on where you’ll get the maximum impact for your dollar.  Once you start looking at various aspects of your company through the 80/20 lens, you’ll begin to see places where you can allocate your resources -- personnel, time, dollars -- more efficiently to produce maximum value.
 
 
 
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