Well hello there friends!
I have something really amazing for you today. What I want to give you in the next four minutes is possibly the single most profound and practically helpful business principle out there. I’m not even kidding.
If you can understand and apply this single principle it can literally change your business and the way your business affects your life.
Powerful stuff. Are you ready?
Have you ever heard of Pareto’s Principle? Maybe you have heard of it referred to as the 80/20 rule? In its simplest form it means that 80% of the effects come from 20% of the causes. It is a principle that has been proven to be true both in the natural world (gardening, economics, psychology) as well as in business. So what does this mean for you?
It means that it is very likely that a few of the following are true:
20% of your clients are generating 80% of your income
20% of what you are filling your time with during the work day is generating 80% of your profit
20% of your marketing investment are generating 80% of your sales
20% of your images on Pinterest are generating 80% of your repins
20% of your clients are generating 80% of your word of mouth referrals
20% of your products are generating 80% of your sales
20% of your work day activities or clients are generate 80% of your frustration
So what’s the big deal? How does that knowledge change my life?
The smartest and most successful business owners are the ones who have identified where this principle is true in their own business and have taken drastic measure to refocus their time, energy, creativity and resources into that powerful 20%.
Here’s what that looks like:
Sara has identified her top (20%) clients generating 80% of the sales and instead of trying to spread herself across all of her clients equally, she invests extra time and resources in these top clients with personal follow up phone calls, thank you notes and/or extra special client gifts.
Tory realized that there were only two activities that actually made her money during her work day, actually shooting newborn portraits and direct client communication that built the client relationship which generated 80% of her referrals. Once she made that realization she hired an assistant to do all of the administrative tasks associated with her business, even blogging! Now she is not only freed up to spend her time doing what she loves but she has more than tripled her profit potential because she has substantially increased the number of shoots that she can take in a given work week.
Maria did an 80/20 assessment of her product sales and identified that 80% of her revenue the previous year came from only 20% of her product line. She made the decision to drop the entire other 80% of her product line that was taking away her design time and increasing manufacturing and marketing costs and redirected all of her creativity and resources into expanding and improving that remaining 20% of her products that were her top sellers. The following year her revenue more than doubled.
Hopefully your wheels are beginning to turn about how this principle could profoundly impact your business. Take some time this weekend to answer the following two questions:
1. What are the 20% of the activities that you do during the week that cause you the most (likely 80% of your) frustration or pain?
2. What are the 20% of your work day activities that generate 80% of the revenue/results/happiness.
I truly hope that you let this idea simmer. It doesn’t matter how many years you have been in business; A simple 80/20 assessment should be a regular part of your rhythm and will give helpful and powerful insight every time!
Do business beautifully friends!
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