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  • Karen Davis

The Pareto Principle


“The way to create something great is to create something simple.”― Richard Koch,

The 80/20 Principle: The Secret to Achieving More with Less (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection in 1896, as published in his first paper. Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.It is an axiom of business management that "80% of sales come from 20% of clients." Richard Koch authored the book, “The 80/20 Principle”, which illustrated some practical applications of the Pareto principle in business management and life. Many natural phenomena have been shown empirically to exhibit such a distribution as the 80/20 rule.So, what does this mean for my business? It means statistically 20% of energy output (cause) is going to gain 80% of your business (effect). Also, 80% of your return (effect) is coming from 20% of your business (cause)! Take a minute to pause and wrap your mind around this one! Resources, finances, and effort likely need to be streamlined so that your 20% is being funneled into the correct avenues of return. We all need to look at our daily activities and see where we spend time and if we are spending time on the correct tasks that will serve a return. Many of us spend our resources inefficiently. How to correct this? The first thing to do is understand and assess where most of the business is coming from and to keep seeding that activity! Know your referral network and your king makers. Tracking lead generation success keeps a business from wild goose chases. Put your energy into the simplicity of the Pareto Principle.When I watch super-performers the one thing that always stands out is their ‘effortless’ efficiency. (or the efficiency of a phenomenal assistant) Top Performers in their field do not seem rushed or stressed, they have learned the attention skill that automatically seeks and recognizes the simplest solution using the 20% of their time and resources. They know how to serve the business and where the returns are coming from.

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