The quest for efficiency and productivity is an eternal one made by entrepreneurs everywhere. Since you’re the visionary and the janitor (and everything else in between) you need to get more work done; sadly, you can’t go to the store and buy more hours for the day. You need to work smarter, not harder, with the time you’ve got.
The Pareto Principle is one of the best productivity concepts in business. Those who use it know its power. Those who don’t use miss out… and will be surpassed by those who do.
What makes the Pareto Principle so powerful is its widespread application to all aspects of life: business, relationships, recreation… everything we do! Of course in this article, we’re going to talk about how it impacts your business… whether you’re just starting up or you’re well on your way.
The Pareto Principle simply suggests that 80% of your efforts achieve 20% of the results while 20% of your efforts achieve 80% of the results. That’s a powerful statement.
Consider how it applies to your business and how you can use it to make your business bigger:
Look at your product line.
- Identify the 20% of your products that bring in 80% of your income.
- Make sure you’re spending 80% of your effort on that top 20% of your products or services.
- Refine and improve that top 20% of your products or services. Make them better.
- Raise your prices on your top products and see if people will pay them. Test for the “price ceiling” and find how high people are willing to spend before they stop.
- Identify the 80% of your products or services that bring in only 20% of your income.
- Make sure you’re only spending 20% of your time on these products.
- Drop these products altogether.
- Package them with your top 20% products, and increase the price.
- Make your products free to increase the perception of value and offer them to your top clients. You may just get more top clients by doing this!
Look at your marketing efforts
- Identify the 20% of your marketing efforts that bring in 80% of your customers.
- Try to discover what it is about that advertising effort that attracts the customers. (Is it the words and images? Is it the place where the ad is displayed? Is it the audience who sees the ad?)
- Improve that marketing effort by doubling the frequency or increasing the size of the advertisement.
- Refine the message by strengthening the copy in the ad. Does it pull better?
- Carry that message across all of your advertising mediums. Will it transfer from one medium to another? If it’s a strong ad, you should try to use it in other places.
- Identify the 80% of your marketing efforts that bring in 20% of your customers.
- Drop those efforts. Frankly, there is very little you can do to improve them to reach the height that your top efforts can manage. Unless you can tweak them slightly, it’s probably not worth your time to work on them. If you’re really attached to them, put them on a backburner for a while.
The Pareto Principle applies equally well to your customers, where you spend your time, how effective your web site can be, and many other aspects of business. Spend a few moments each day identifying the 20% of your business the accounts for 80% of your success and do everything you can to strengthen it!
