Are you familiar with the Pareto Principle? Also known as the “80/20 rule,” it dictates that 80% of outcomes result from 20% of the effort. Economist Vilfredo Pareto (1848-1923) first observed that 80% of society’s wealth was produced and possessed by 20% of it’s population. Pareto even observed this phenomenon in his garden peas – 20% of his pods produced 80% of the peas. Ever since, the Pareto Principle has been a guidepost for economists and sociologists alike. I’m here to tell you why the Pareto Principle should be your mantra for 2014 and beyond.
Think about any part of your life and I guarantee there’s 20% that’s providing the most benefit and 80% that’s wasting your time. For example, consider a “busy” day at the office – I bet in an 8 hour work day you feel as if you only finish 1.5 hours of real work. The other 6.5 hours you’re too busy putting out fires to get actual work done.
Too many of us are stuck being busy instead of productive. We feel overwhelmed and there’s “just not enough time in the day.” Obviously we all want to be more productive and less busy, but how? By focusing only on the 20% of activity that’s providing the most value and eliminating 80% of the activity that’s distracting us from our goals. The first step is identifying the 20% of our activities providing the most benefit. Then we must decide how to eliminate the other 80%.
Here’s an example with customers. I guarantee 20% of your customers are the most profitable. They pay their bills on time, barely use customer service, and are generally easy to please. Your other 80% however … those guys are the worst. You know who I’m talking about – they’re 90 days past due, they spend hours complaining on the phone, and nothing is ever good enough for them. Ugh, why do you keep those guys around? They’re awful!
We all have these types of customers and we keep them because “we need the business” or we don’t know how to get rid of them. Understandable, but know that these customers are actually hurting your business – they’re stunting your growth and sucking up your precious time. Does that make you angry? Then consider this – getting rid of that 80% will free up time to focus on your 20% power customers, which will then bring in more customers just like your top 20%. Soon your entire client roster is filled with people who pay on time, are super easy to work with AND you have more free time. Doesn’t that sound awesome? It’s possible, but first you have to define your top customers and then fire your bad ones.
How to define top customers: Look at your sales sheet and see which customers provide the most profit for the least effort. Examine those specific customers and see if you can identify a pattern – Where did those customers come from? Are they buying your products for a specific purpose? Why do they buy from you and not a competitor? Identifying patterns in your top customers will help identify how to find more like them.
How to fire bad customers: You have two ways – 1) Raise your fees 2) Tell them to go elsewhere. Most people start at option #1 and that’s alright. Not only do you get a raise if they accept your higher prices, but difficult clients are often the cheap ones and you’ll see they are the first to go. That’s ok – let bad clients go somewhere else and suck up your competitor’s time.
If you go with option #2 and directly tell your bad customers to go elsewhere, remain professional at all times. Simply say, “We’re getting too busy and have to scale down our client list” or something similar. No matter how much you want to tell them where to stick it, leave on a positive, professional note.
Once you’ve mastered the Pareto Principle in one area of your life, I urge you to try it on others. Get creative about how to “fire” the 80% of unproductivity in your life. Get rid of the time suckers and distractors. You may need to automate email or avoid it before noon. You might need to scale down social media time to evenings only. Think about efficiency and purpose and always ask yourself, “Is this an 80% or a 20% task?” It might be difficult to enforce at first, but remember – if 18th century peapods can do it, you can too.
Emily Worden is a Boston-based entrepreneur and small business strategist. She started her custom handbag business in 2008 while pursuing her MBA and working 3 jobs. After a particularly awful shift at her weekend catering gig, Emily threw down the apron and said, “Screw it, I’m going to do something I love!” She graduated and quit her jobs to pursue eThreads full time. Emily believes business can be a powerful catalyst for change. She started eThreads to satisfy the Triple Bottom Line – people, planet and profits – and hopes to inspire other businesses to do the same. She started the cat lifestyle business Ferocious Friends in 2012 with her husband Case to satisfy the needs of their cats Lulu, Smoke and every feline around. Emily started emilyworden.com in 2013 to assist other small businesses with strategic vision and implementation with a focus on marketing, leadership and social media.
Emily is an avid DIYer and loves making things with her hands. Her happy place is the library where she walks once a week; she’s always excited to learn something new. Her extra happy place is a great view of sunset with music pumping in her ears. Emily is grateful everyday for following her dreams and hopes to inspire other people to do the same.
2 Replies to “What Can 18th Century Peapods Teach You About Efficiency?”
Love the idea of applying this Pareto Principle to my life! I have a wise friend that once told me she never wants her life to be “busy” she always goes for “full” I think she understands what it means to focus on the right 20%
You have me thinking! Thanks!
Alli, that’s awesome! I especially love your friend’s quote. I’m so glad you’re inspired by this article! My sister is a lawyer and has been focusing on “firing” her bad clients … her phone now rings much less, she’s less stressed, AND she’s making more money. I hope you realize the same awesome benefits from your 20%