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- Elon Musk, Investor & Entrepreneur
4 min read
By Nick Bell

What is the 80/20 Rule and how can it improve my business?


If you are someone that runs a business, you may have heard about the 80/20 rule. It can pop up in many different contexts and can improve your business in a wide range of areas.

Let’s talk about what the 80/20 rule is and how it can be applied to many aspects of your business. As you may know, it is all too easy to let our time management abilities run wild when things start to get hectic. You can use the 80/20 rule when it comes to time management, investing in your business, studying your analytics, and so on.

What is the 80/20 rule?

The 80/20 rule, also known as the Pareto principle, is named after the Italian economist Vilfredo Pareto who was the first to study this phenomenon. It is considered one of the most powerful principles of all time and it has been proven useful both in a personal and professional sense. The Pareto principle believes that for any given event, 80 percent of all outcomes (or outputs) results from 20 percent of all causes (or inputs).

What does the 80/20 rule suggest?

For business, you’ll need to look for the 20 percent that drives 80 percent of the business revenue. For example, if you are running an ecommerce store, you are probably wondering what 20 percent of your products drives 80 percent of the profit. The 80/20 rule suggests 80 percent is output and 20 percent is input.

What is the 80/20 rule applied to startups?

When it comes to your startup, you will probably be operating on limited capital at the start and looking to grow over time.

Applying the 80/20 rule to your startup could mean focusing your energy on the 20 percent of clients that rake in 80 percent of what you make. These are your good paying clients or your golden gooses, so you need to do whatever is possible to ensure that they are happy and keep returning for business.

For startups looking to grow, it is important to follow the 80/20 rule. 80 percent of your growth may just come from 20 percent of the money you have invested.

The 80/20 Rule For Time Management

Time management is key when it comes to improving your business. You need to be able to delegate the less important tasks so that you can focus on the most important aspects of your business, the revenue-producing activities.

The 80/20 rule for time management implies that 80 percent of the results you achieve will come from 20 percent of the effort that you put in. When you put effort into the priority tasks, you will then achieve the desired results that you want. In fact, 20 percent of the tasks you perform will amount to 80 percent of the total success that your business will have.

One thing you want to keep your schedule clear of is the ‘need doing’ but ‘are actually not that important’ tasks. These can take up about 80 percent of your time (if not more). For this reason, it is a good idea to delegate or outsource these tasks to your staff. Make sure you delegate tasks to someone who is competent to get it done with little to no issues. In the meantime you can stay focused on the top 20 percent that produces revenue!

Another thing to keep in mind is time wasters. 80 percent of time wasted may be linked to 20 percent of your staff. Specifically, for every ten employees you may have, two of them will probably be wasting time with social media, email, performing needless tasks, and so on. If need be, you can remedy the situation by letting them know that time is important especially when it comes to productivity. Don’t hesitate to cut out the time wasters and replace those who can better manage their time wisely.

Final Thoughts

When used properly, the 80/20 rule can work wonders for your business. The rule can be applied to time management, the way you make money and your growth strategy moving forward. Implementing this rule will put you at an advantage, especially over your competition.

For every cause, there is an effect. Now that you are aware that only 20 percent of your input is resulting in 80 percent of your profit, sales, resources etc, use it as if your business depends on it.

About the author


Co-Founder of Lisnic.com 🔥 & Founder of 12 digital agencies 🎯
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