Minute by minute

my thoughts on making the most out of all of life's minutes…

Word up Wednesday – The Rule of 80/20

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One of my favorite things I learned from all those economics classes I took in college was the Rule of 80/20.  More formally called Pareto’s Principle.

The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial.  I don’t love the word trivial when talking about customers or time – but so be it, the definition.

You can apply the 80/20 Rule to a lot of things – but the one example that always stuck with me was  –

80% of your business comes from 20% of your customers.  Or – conversely – 20% of your business comes from 80% of your customers.  

OK – so what does this mean?  It basically means that a large portion (80%)of your sales, repeat business and referrals comes from 20% of your customer base.  So in terms of customer cultivation, you should spend more time and energy focusing on attracting and keeping those 20%.

Further explanation states that the “trivial” other 80% of your customer base only provides you with 20% of your sales.

The word trivial here implies that those customers aren’t important and you shouldn’t focus on this group.  NOT SO!  You still need to do things to attack these people, just don’t spend all your time on it.

Here’s a little background on Pareto’s Principle – this article gives a good explanation of how the rule came about.

The question you should be asking is – how can this be applied to my current situation?

  • Well, if you’re in business, it is easy to see who are your repeat customers and what products and services are they buying and using.  (If you’re not tracking your sales, or if you don’t know who your top customers are – please call and let me show you how, it’s really quite easy).   I would venture to say that 20% of your customers are repeat customers who keep coming back or referring their friends to  you.  Likewise – they are probably providing you with 80% of your total sales.
  • Another way to apply this rule is – 20% of your services or products are providing 80% of your sales.  So concentrate on those.  Take me for example, most of my readers find me on Facebook.  One of my “fans” will like a blog or comment on a post and that will pop up in their news feed.  Their friends see it and check out my page and hopefully become a fan too.  Of the other ways I promote my blog – Twitter, LinkedIn, web searches and tagging my blogs, Facebook brings me the most attraction.  My strategy should be to open up more conversations on Facebook and try to get more “likes” on that page.  Twitter and LinkedIn are helpful, and I should still work on cultivating those contacts – but since those two have proven to not be as “lucrative”, I shouldn’t put the majority of my time into those outlets.
  • Here’s one more – I’m a member of my son’s PTA at his school.  We use the 80/20 Rule all the time when we are trying to estimate how many families we should plan on coming to an event or participate in a fundraiser.  We figure that 20% of the school is most active and that gives us a rough number of how many to anticipate participating.

Sometimes the 80/20 Rule doesn’t work, but I still try to apply it.  Usually it works itself out, but it gives me a jumping off point when I’m trying to figure an estimate on something.

Give me a challenge  – give me a situation and I’ll apply the 80/20 Rule to it.   Be it laundry, cleaning house, running errands, cultivating customers, – – give me your best shot!  I’d love to see how we can apply this rule to other situations.

Happy Wednesday Everyone,






Author: amymunns

Finding more minutes in your day. Specializing in time management, goal setting, prioritizing tasks for small business, busy professionals and active families.

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