Paretos Law- Your Formula For Success
A 'dirt-world' retail business I used to manage had a large turnover, a very high profit, and less than 100 lines. Early in 2001, I was contracted to manage another business. This one carried over 800 different lines, yet had a turnover of only about a sixth of the other business, and a lower profit margin. They both had a comparable amount of traffic and credibility in the market, so how can it be that the results were so different?
The explanation starts with Vilfredo Pareto, an Italian economist and political sociologist who lived from 1848 to 1923. He devised the law of the 'trivial many and the critical few', better known as Pareto's Law, or the 80:20 rule. This rule says that, in many business activities, 80% of the potential value can be achieved from just 20% of the effort, and that one can spend the remaining 80% of effort for relatively little return.
Old Vilfredo might have lived a century ago, but he was spot on. I've been in business a long time, and I can confirm the almost universal truth of the 80:20 rule, in many forms.
- When Sales Manager of a Realty office, I had 19 sales staff working to me. About 85% of the business was written by the four top staff.
- In a Consumer Electrical business I owned, around 75% of the turnover came from the the best-selling 20% of the stock.
- In an eco-tourism business I managed, there were almost 40 Departments of stock. One department alone produced over 25% of the profit; the next five departments produced the next quarter of profit; the next seven another quarter, and the last twenty-five or so together only produced the last quarter of profit.
The 80:20 Rule applies in almost every sphere. It's uncanny. In almost any field, 20% of the resources produce 80% of the result. It's vital to understand that the reverse is also true- things that take up 80% of your time and resources, will only produce 20% of your results.
Stocks, products, services, insurance, litigation, people- the 80:20 Rule keeps coming up! Look for it and you'll find it.
The universality of this principle should be a powerful guide for you in business. Find out how it applies to your enterprise, and you have the power to set the vital priorities which will mean the difference between failure, survival, and success. Take the time now to look at your business. Look at where the results are coming from, and concentrate on those areas. Look at some of these areas...
- Have a product range? Have a look at how much of your profit comes from each item. Put your effort into the 20% that give you 80% of your sales- your winners.
- Selling products or services? Most likely, 80% of your sales come from 20% of your customers- the ones who make the big purchases and are repeat-buyers. Cherish that 20%.
- Have a sales force? Have a look at how much of your profit comes from each person. Make sure you reward and retain the 20% that are your winners.
- Have an affiliate program? Find the top 5-20% who give you 80% of your income, and make sure you support, encourage and reward your winners.
- Do advertising? Have a look at where the sales come from. Then identify the few ads that really pull, and the few places where you run them that really produce. Then refine your winning ads, and run them in those few places that give you the best results.
- Check your web traffic logs! Which keywords are bringing you the most traffic? Which search engines? Which websites? You'll find that a small number of keywords, search engines and websites give you the lion's share of your traffic. Nurture them, and build on those strengths!
Run the 80:20 Rule over YOUR business today. It will save you time, effort, money and resources, and take you further down the road to business success. Bon voyage!
John Payne is the Publisher of Web Marketing Ezine and an SEO consultant.
John is also the Proprietor of the 'dirt-world' business Enviro-Friendly Products.
Latest News
Single Source Introduces New Advanced Quote Management (AQM)(TM ... MarketWatch - All functions seamlessly integrate to the inherent back-office financials, inventory, purchasing and management reporting functionality of SM-Plus-meeting ... KANA Recognized by Leading Industry Publications for Innovation ... |
![]() BBC News | ECONOMIC REPORT Global manufacturing gauges collapse in November MarketWatch - ... of price pressures hit an all-time low, according to a survey of corporate purchasing managers released Monday by the Institute for Supply Management. ... Manufacturing index drops to 26-year low Manufacturing index at 26-year low Manufacturing hits 26-year low |
![]() HispanicBusiness.com | Construction Spending Reflects Economic Slowdown New York Times, United States - The Institute for Supply Management’s monthly index of manufacturing activity fell to 36.2, from October’s 38.9. The reading is worse than Wall Street ... October construction spending drops 1.2 percent US manufacturing weakest since 1982 Construction spending fell again in October |
![]() WCBD | Price Tags on Partridges and Pear Trees: A Different CPI New York Times, United States - By Catherine Rampell For the last 24 years, PNC Wealth Management (or its predecessor, Provident Bank) has released this whimsical index, a measure of the ... Video: 12 Days of Christmas' Items Would Cost $86,609 '12 Days of Christmas' items would cost $86609 Twelve Days of Christmas would cost $21000 |
AGC and LCM Declare Dividends MarketWatch - a diversified closed-end management investment company, has declared its December monthly dividend of $0.0664 per share, reflecting a reduction of $0.0286 ... AGC and LCM Declare Dividends Madison Strategic Sector Premium Fund (MSP) Declares Quarterly ... PPR - $.0340 November Dividend |
![]() CPI Financial | AIG sells wealth management unit to Abu Dhabi group International Herald Tribune, France - NEW YORK: American International Group, the troubled insurance giant, said Monday that it had agreed to sell its wealth management provider AIG Private Bank ... AIG Sheds A Private Bank UPDATE 1-AIG to sell AIG Private Bank to UAE's Aabar AIG to Sell Private Bank to Aabar |
Updated Information Regarding Auction Preferred Securities Market ... MarketWatch - BOSTON, Dec 01, 2008 (BUSINESS WIRE) -- MFS Investment Management(R) (MFS) today announced the availability of information on the results of the weekly ... |
Lincoln Financial Group Announces New Senior Management Committee ... International Business Times, NY - She will also serve as amember of the firm's Senior Management Committee. Bettinger-Buckingham joins Lincoln Financial with more than 20 years ofexperience ... |
Gideon Technologies CEO To Give Unified Compliance Management ... MarketWatch - Unified Compliance Management simplifies this complex problem. "The combination of a holistic centralized view of the network, unified and continuous ... |
Research and Markets: Training Management Maturity Model: A ... MarketWatch - How effective is your current training management system? What do you need to do to improve it? Find out with this best practice model and set of assessment ... Research and Markets: Fundamentals of Quality Control and ... |
Resources
-
AdWords | Google AdWords | 21 Ways to Maximize ROI by Andrew Goodman
Get the original Google AdWords handbook by Andrew Goodman. This 155-page e-book is packed with advanced tips to help you maximize your AdWords campaigns. Download and get free December 2005 update.
-
Reservation software for Hotels, Motels, Bed and breakfast
Reservation software for Hotels, Motels, Bed and breakfast
-
Restaurant Checklists: restaurant menu design, cafe training, business plans, restaurant marketing a
Full package of restaurant information including restaurant menu design, training, restaurant business plans, restaurant marketing and Management forms and templates
-
Castlemelody.com: Web design and creative design of graphics
Web design with content Management system for dynamic and flexible websites.
-
...MySoftwareTemplates.com high-quality Microsoft Word templates for Software
Development, Proposal
Write successful Proposals, White Papers, Case Studies with slick templates, checklist and forms.
-
Living Within Your Means - The Easy Way!
"
-
PARENTING TOOLS to design the family of your dreams! What does your dream family look like?
Powerful tools for parenting, anger Management, and creative blocks!
-
Productivity. Improve business productivity through work measurement and method study.
Set of resources to improve worker, workplace and office productivity. Learn to measure productivity, calculate a productivity index and construct a total factor productivity index. Resources include team productivity and employee productivity.
-
Construction Information Services - Construction Management
Construction Information Services include Construction Management ebooks - Construction Software - Articles - Firm directories - Forecasting and Trends of the building industry
-
Landlord Property Management Rental Guide
Looking to manage your own rental property? Use our beginners guide for landlords and rental property investors!



