The Pareto Principle

     In business it is a common rule of thumb that 80% of your profit come from 20% of your customers. This idea stems from what we call the Pareto Principle, however is also known as the 80/20 rule of time management. Vilfredo Pareto introduced the world to this principle in 1895 after he found that roughly 80% of the land in England was owned by 20% of the population. Later on he discovered that the principle held for most economic activity as well. He found that usually 20% of your activities are subject to 80% of your results no matter what activity you are pursuing. This rule has become one of the most helpful concepts of time management and can be applied to manage your time and resources in a more efficient manner.

What does this mean for you?

     Managing your time is one of the many challenging tasks you have to deal with when working as an entrepreneur. It can be hard to structure all tasks in a productive and efficient manner, while keeping motivation high at all times. The Pareto Principle is an effective time management tool that can help you build efficiency. By learning more about the principle and how you can take advantage of it, you can drastically improve your productivity. Let’s say for example that you have 10 things on your to-do list for your business. According to the principle, 2 of those things will account for 80% the results, while the rest 8 tasks will only account for 20% of the results. If you learn how to range your tasks from least important to most important, you can prioritize and complete the most important tasks first. Another example can be that you have a business that has 10 customers. According to Pareto, 2 of these customers account for 80% of your profits, while the rest 8 customers will only bring 20% of your profits. When you figure out which 2 customers that bring you most of your profits, you can focus the majority of your time and attention on the important customers. The list goes on as this rule of thumb can be applied to any area of your business or life. Now we will go through a couple of tips on how to take advantage of the Pareto Principle.

Tips on how to use the principle to your advantage


  1. 1. Prioritize tasks

     Learn to range your tasks from the least to the most important. When you know the importance of each task, you can complete the ones with most value for the business first. The tasks of greatest importance are often the most challenging and complex, however the payoff for completing them is a lot higher than the rest of the tasks. Therefor you will do yourself a favor when you learn how to prioritize your tasks according to their importance. A good tip is to ask yourself before you are about to start working whether the task is in the top 20% of your activities or in the bottom 80%. Complete the top 20% first!

  1. 2. Focus on your most productive time slot

     Usually people have a time slot during their day when they are the most productive. Find out whether you are an early bird or a night owl when it comes to getting things done. Do your work when you work the best. If you have a peak time where you are the most productive then use that time for the most important tasks. Do tasks of minor importance during your less productive times.

  1. 3. Don’t just work to work

     A lot of people fall into the trap of constantly being ‘busy’, but not really productive and efficient. It is easy to procrastinate with the more important tasks and simply play around with the easier tasks that require less effort. However, you have to remember that being busy is not really taking you anywhere when you are working for yourself. You have to be efficient and use your time wisely. You are not getting paid by the hour, but by how much work you get done that is beneficial for your business.

  1. 4. Don’t feel guilty about relaxing

     Allow yourself to take breaks between your productive hours. Take a break when you have completed the most important tasks for your business or been working for a couple of hours during your productive time. Give yourself a positive reinforcement for the work you have completed, get some rest or do an activity you love to energize yourself for your next productive session. Taking breaks will only give you more energy for your next productive time slot.

Richard Koch – 80/20 Principle




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