Vilfredo Pareto's Principle / The 80-20 Rule

80% of your results are produced from 20% of your efforts

In 1906, Italian economist and sociologist, Vilfredo Pareto (sometimes misspelled Wilfredo, Alfredo, or Vilfred) created a mathematical formula to describe the uneven income distribution in Switzerland at that time, observing that eighty percent of the wealth was held by a mere twenty percent of the families.

Further empirical studies for other time periods, for other countries, produced the stunning result that they all followed the same pattern. Later analysis of distributions in industry and nature has demonstrated that 80/20 Pareto distributions were very common in various fields and not exclusive to income distribution.

The 80-20 rule.

The application of this law has now progressed to the point where a ratio of approximately 20% to 80% can be found as an effective measure for most things in life. Whether revenues generated per customer or value for hours worked, it usually can be found that 80% of all of our results in business and in life come from only 20% of our efforts!

As importantly, the 80-20 ratio seems to hold true for many input/outputs, causes/consequences, or efforts/results. It also holds true across the spectrum of relationships, business, finances, time— whatever the case may be.

The 80/20 Rule is also refered to as the vital few (20%) and the trivial many (80%)

Discarding low value activities in all areas of your business, work and personal life, the true essence of the Pareto Principle, will create the time and freedom for you to enjoy a more richly endowed lifestyle.

When this concept is put to business owners they bawlk at the concept and say ... "I can't afford to discard 80% of my products or customers!"

Whilst this may be true the application of teh concept serves to highlight what you and your staff are doing isn't supporting the growth and development of your business. Knowing where the time and profit wasting is happening is the first step to opening up change possibilities.

A simple course of action here would be to sit down with your last years figures and do a quick check by asking some simple questions such as ....