One of the most well-known time management methods is the Pareto Principle, also known as the 80/20 rule or “the law of the vital few.” This method is named after Vilfredo Pareto, an Italian economist who in 1906 noticed that 80% of the land was controlled by 20% of the people, and that 20% of the pea pods in his garden produced 80% of the peas.
Business management consultant Joseph Muran showed that this principle can be applied in virtually all areas of life, including economics, mathematics, business, and health. The Pareto Principle can be found in virtually everything.
When you set personal goals, you can use this principle to maximize results by following a few simple steps, taking you closer to your goals in a much shorter timeframe.
Leverage your time with the Pareto Principle
Time is one of our most precious resources. It is something we all have in common, as we all have the same amount of time in a day. Most of us do not make efficient use of this time. We all have productivity peaks — times when we’re most effective. We tend to produce the best results during certain times. By identifying your productivity peaks and applying the Pareto Principle, you can use your time in an optimal way and optimize your results.
If you can figure out which 20% of your actions are producing 80% of your results, you can magnify your results. After identifying the most productive actions, you can devote more of your time to them.
Example of the 80/20 rule
The 80/20 rule doesn’t only apply on one basic level, it can be extended further. For example, you run a business and 80% of the sales come from 20% of the clients. Make a subgroup of that 20% of the clients. Within that subgroup the principle applies again; 80% of the sales come from 20% of the clients. This means that 4% (20% of the smaller group) of the total amount of clients are responsible for 64% of sales. So, if you focus more energy on that 4%, you can get better results than if you spent your time on the others.
You can use this principle to get more out of your existing best clients, and you can also use this principle to identify what a“perfect client” is for you. With that knowledge, you have a better idea of what type of new clients you should attract to maximize sales.
The Five Steps of the Pareto Principle
Step 1 — Identify your goals
The first step in using the Pareto Principle is to identify your goals. When you know your goals, you have a target. Without a target, the Pareto Principle is not very useful.
Step 2 — Track your progress
The second step in utilizing the 80/20 rule for growth in any area of your life is to thoroughly track your progress. If you are in sales, this means tracking the number of leads you contact per day, how many phone calls you make, how many sales you close, the value of the closed sales, etc.
These days, almost anything can be automated. Before investing time and money in advanced measurement tools, start by creating a simple spreadsheet to track your progress. If you have a weight-loss goal, track how you are doing. What did you eat that day? How many minutes did you exercise? How many steps did you take? What is your current BMI?
Step 3 — Identify the 80/20
Now that you have tracked your actions for a while, you can identify the 80/20. Which 20% of your actions is giving you 80% of results? Once you identify your 20%, you can work on scaling it. For example, if you found that 80% of your sales results come from a specific type of lead, focus on calls targeted at similar leads. Tracking is important — you’ll be able to identify the source of results.
Step 4 — Scale or outsource
Depending on the type of goal you’re working toward, once you have identified your 20% you can scale efforts in that area. Or outsource it someone else if you can. For example, an online marketeer finds that 80% of her income comes from a group of 20% of her clients. Her goal would then be to scale that subgroup. There are several ways to do that.
Say 80% of your income comes from 20% of your clients, and you spend 50% of your time on it. By reducing the time spend to 25% by outsourcing some of your tasks related to that work, you can spend more time on scaling your business by locating more clients that match the characteristics set of your top 20%. All you have to do is create customer profile including, their demographics, of your top 20%, and put efforts in attracting similar clients.
Step 5 — Identify the 20% of the 20%
To utilize the full potential of the Pareto Principle and exponentially improve your results, you must identify the 20% of the 20%. The 20% of your 20% subgroup (or 4% of the total group) produces 64% of your results. If you can identify this elite 4% subgroup, you can achieve results through scaling.
This 4% elite subgroup is a class of their own — your optimal peak-performance group. If you can identify this 4%, foster it in any way possible. Nurture it — this is your ticket to achieving phenomenal growth.