Tag Archives: pareto principle

The 80:20 Rule at Work

Many an enlightened business owner will preach the benefits of working to the 80:20 Rule. In essence the rule outlines that 80% of the results are caused by 20%of the actions themselves – or in plain Pound or Dollar terms: 80% of your revenue is derived from 20% of your clients.

This is a great rule to have, but very few people are applying it – especially people in the one-to-one professions of consulting, training, coaching etc.

With every new client I go through a very simple exercise of ‘time management’ and ask the simple questions of:

  • How is the majority of your day / week / month spent?
  • How much of that should you NOT be doing at this stage in your business life cycle?
  • How much of your time could be released for more income generating activity?

My key point here is: when we start up in business we jump on that old treadmill (much like the one we were on as employees) and do what it takes to get business in and food on the table. Unfortunately not enough of us take stock every year to see how we have moved on and whether our business model needs tweaking.

This is a vital step when you are looking to grow or indeed exit your business at some point. In a franchise scenario, a prospective franchisor goes through this activity pretty rigorously because a solid franchise business plan has carefully worked out its ‘Winning Formula’ and can very clearly identify the priority activities and how much they bring into the business. Any activity that is highlighted as administrative or supportive, the franchisor will look at providing a solution that covers these needs, so that the franchisee will be freed up to heighten his/her income generating potential.

My advice to ANY business owner is to pretend that you are creating a franchise model. Why? Because you have to do the following:

  1. Document your business (spend time looking at your current way of doing things)
  2. Streamline where you can (reduce costs and increase your propensity for profit)
  3. Remove YOU from the equation (the business must not need your daily input)
  4. Succinctly identify your target client market
  5. Review your pricing strategy

These are steps I highly recommend any business owner undertakes. You will add value to your business for one thing, and for another you will have taken the time to work out what is making you the best return and stop doing whatever is wasting your energy and time. That, to me will bring you closer to your 80:20 rule of working.