What's Your Most Important 20%? (Part 1 of 2)

Many businesses have an easy access to dramatic improvements in profitability by focusing on the most effective areas and eliminating, ignoring, automating, delegating or re-training the rest, as appropriate.

The Pareto Principle states that 80% of the effects come from 20% of the causes. The distribution shows up in several different aspects relevant to entrepreneurs and business managers. For example:

80% of your profits come from 20% of your customers
80% of your complaints come from 20% of your customers
80% of your profits come from 20% of the time you spend
80% of your sales come from 20% of your products
80% of your sales are made by 20% of your sales staff

Here's how that can translate into your business.
1. Know which 20% of your time is giving you 80% of your results. You've got to start with understanding what is the "vital few" vs. the "trivial many".

In your business, where do you spend 20% of your time that yields 80% of your income? Where do you spend 20% of your time that yields 80% of your clients? Where do you spend 20% of your time that yields 80% of your team members?

2. Does it make sense to invest more of your time into the vital few or into the trivial many? There is no pre-determined answer.

If your best clients reliably generate large sales for you, are they close to their maximum of how often they buy or how much they buy? If so, then spending more time on them will give you small results.

On the other hand, if you have a lot of mid-range clients: they buy occasionally or they spend modest amounts - then figuring out how to increase the sales across this large group by 10% might make a huge difference to your bottom line. That difference may be bigger than increasing sales among your already-top clients.

3. Remember that this principle does NOT automatically mean you should always ignore the trivial few. You still need to provide great service to ALL your clients; you still need to support ALL your team members.

CALL TO ACTION

First, know what is your 20% time investment that brings you 80% of your results. This principle, backed up by years of research indicates that there is ALWAYS an imbalance between your effort and your results. Some results come from little effort; some results come from more effort. Which of your results come from little effort?

Once you know what gives your business the most results, then you can prioritize to make sure that your most important 20% items get done, so you get the 80% results.

Then you can look at the remaining 80% (of your time, your clients, your team members, etc.) and decide which of those are most important.

If you have no idea how to approach this or if you're awash in hundreds of items which all seem to have equally urgent importance, then outside support can help. Through powerful coaching questions, I can help cut through the overwhelm and the fog, to help you gain more clarity and create focus. Where you put your focus is where you get results!

© 2011 Marcy Stahl