Pareto Principle Power

The 80-20 rule

The Pareto Principle is a long standing key to success

Have you ever wondered why you feel like life is so full on and you can never get anything done?

Do you feel like you’re always struggling to please others and keep your family and friends happy?

Is your business stagnant, has it stalled? Or do you know your market has more potential but you just don’t know where to focus on in your business to tap into that next level of growth?

You’re not alone! This is very common. But there’s good news. There is a powerful principle that can unlock your full potential, maximise your profits, and enhance the quality of your relationships. YES, the 80-20 rule is a simple but magical formula that I know can be the ingredient to get you out of that rut you’re in.

The 80-20 rule, also known as the Pareto principle was first used in macroeconomics to describe the distribution of wealth in Italy in the early 20th century. It was developed in 1906 by the Italian economist Vilfredo Pareto. Another name for the rule is known as “The law of the Vital Few”, highlighting the importance of the Vital Few areas, tasks, customers, and relationships which produce or account for the majority of your results or outcomes.

Investopedia defines this rile as an aphorism which asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event. Ok, say what? In simple terms, 20% of everything you input results in 80% of the output. The 20% matters most!

The exciting aspect of this principle is that it can be applied to any area of life. Whether it be business, personal finances, time management or relationships. The power of this principle can enhance your life and help you stay focused on what really matters so that you can maximise the results you want.

Below are some examples of key areas you can take action with today to make some positive change and move towards the life you’ve always wanted.

TIME MANAGEMENT

“There is nothing so useless as doing efficiently that which should not be doing at all” – Peter Drucker

When it comes to making time for what’s most important, most of us are constantly distracted and drawn by someone else’s agenda. Social media, the news rhetoric, dramatic family members, piles of work on your desk, endless to-do lists, or an email inbox that would make anyone break into a sweat. Sound familiar? The 80-20 rule can help us focus our attention on the areas of life which are most important. Our Values. If you don’t know what your values are or haven’t written them down before then I recommend this be the first step in maximising your productivity with your time. Write down what’s most important to you. Faith, family, integrity. Health, excellence, compassion. Diligence, consistency, fitness. Honesty, contribution, loyalty. Whatever they are, make them clear. This is the starting place for productive time management. Once you know your values, you can then review and assess how you are currently spending your time. Are you giving your best efforts to what’s most important? Are you allocating your time appropriately in line with your values? Or is your time driven by external circumstances? Lacking boundaries and parameters with our time management can end up leaving us spending weeks, months, and years of our most precious resource (our time) on meaningless habits, wasting away our future and building a legacy we never intended.

Be intentional! Know your values and then direct your time and focus on the 20% of activities that fuel what’s most important to you. Several years ago I was fortunate to pursue mentoring relationships with people who could give me perspective on my priorities and help me focus my attention on the tasks that were going to serve my future long term. There are many areas of my life which I needed to improve over time. One example which was life changing for me was my shift in focus in the time available after family dinner each evening. When I actually measured how I was spending this time what I found was I put the TV on by default at 7 pm then opened up my laptop to continue ‘working’. More emails, more reports, more auditing. I worked in a high-performing, fast-paced environment which demanded a lot of me. The excuse of “I don’t have time” was not a fact, it was a mindset. One which required mentoring perspective to shift my focus. I started to reprioritise the time between 7 pm and 9 pm each evening and replaced my activity with habits that were going to help me achieve my long-term goals and dream. This was a subtle but significant change I made which started the journey to financial freedom for me and my family.

I highly recommend seeking advice from someone who is experienced and equipped to help you maximise your time and live through your values.

RELATIONSHIPS

Have you ever written down in order of importance, the top 10 relationships in your life? Have you then considered how much time and attention you give them on a regular basis? You might find that the top 2 or 3 are left a bit short changed when it comes to the appropriate time spent based on how important those relationships are to you.

“The quality of your life is determined by the quality of your relationships” – Tony Robbins

Over time I’ve found that as I’ve been more intentional about fostering the right relationships, the quality of my life in all areas has improved. Spending more time with people who are aligned with my values, appreciate my company, and encourage and build me up no matter what path I pursue has been both rewarding and fulfilling. It also makes me happy. Focusing on the 20% of friendships that can draw out my potential is key to my personal growth. As a result, I’m able to add more value to more people because I’m always growing.

So how does this work for you? Maybe it’s time for you to review how you’re allocating your thought space and who is impacting your life on an ongoing basis. Take stock and think about the key relationships in your life that need more attention from you.

BUSINESS

What activities are you currently focused on in your business? Have you stopped for a moment to consider how you are allocating your energy when it comes to maximising the output you desire? When it comes to business, the goal of the 80-20 rule is to identify the inputs that are expected to be the most effective and then make them the priority.

One of the common mistakes many small businesses make is they spend too much time on tasks which have very little impact, if any at all, on their overall results.

It’s important to maintain a quality customer focus. If you have 10 customers in your business and two of them produce $1,000,000 of revenue each per year, and the remaining eight provide a total of $500,000 altogether. Does it make sense to give the same time and attention to every customer equally?. The 80-20 rule would suggest the two customers providing 75% of the overall revenue demand the most time and attention since they are producing the majority of your revenue. Although all customers are important to any great business, it would be inefficient and growth limiting to spread your resources across all customers. Of course, business is not always this simple but it can help us challenge the status quo and redirect our resources to the customers, activities, and even spending, that produce the greatest returns for our business.

I’ve been around and involved with multiple businesses over the years and it’s fair to say that almost every business has room for improvement. I’m fortunate to work alongside a high-performance leadership program in conjunction with some of my business partnerships and the 80-20 rule is always a principle I keep open for discussion. Constantly making adjustments to maximise my efforts to ensure I am spending 80% of my time on the highest performing 20% of individuals.

The 80-20 principle is a game-changer for business and your personal life. Take time to assess where you’re at and then take the necessary steps to focus on the 20%.

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