The Simple 80/20 Pareto Rule Used to Grow Small Businesses

So, what is this Pareto Rule?

Pareto’s 80/20 rule is a really interesting concept. You’ve probably heard about the principle before, but do you truly understand the power it has to remold your business marketing and sales efforts?

Not only is this rule used in business, it expands in every way of life.

For example, have you ever taken 5 hours to produce the most beautiful, steaming Sunday roast, and noticed it only takes 5 minutes to devour it completely. This is Pareto’s rule. You’ve spent 80% of your time roasting the potatoes, peeling the carrots, stirring the gravy, and carving the meat, but the remaining 20% of the time is spent eating it, which is the best part!

This captivating concept was discovered by an Italian Economist in 1906. His name? Vilfredo Pareto. He noted that 80% of the land in Italy was run and owned by 20% of its people. Interesting isn’t it? Have you ever noticed that?

Once he’d detected this, Pareto became almost obsessed with the idea, relating it in everything he did.

The general meaning of this principal is that often, the majority of the outputs are only caused by a small amount of input.

In today’s world, the most effective and successful people use the 80/20 rule in business. It’s the greatest secret to victory. Want in?

Why you should use the 80/20 rule as a guide to come up with highly effective business solutions?

Like we mentioned above, the most successful business people in the world use this rule day in and day out. The 80/20 rule can be used to generate the most money/growth/opportunities, whilst putting in the least amount of effort.

Your time, money and energy shouldn’t be wasted on little tasks that generate little to no results in the business. Direct your attention to the things that yield the highest results, whilst using your effort minimally and efficiently.

Applying this to the business world – no matter what your business does, whether you are an e-commerce product based or a service based agency – you will benefit from following these rules.

This could mean that 80% of the sale sin your company come from 20% of your customers. On the other hand, it could mean that 20% of what you do reflects the 80% of an activities outcome.

Determining what pieces of work are vitally important and which bits will reap the most benefit for your business is what Pareto’s rule is valuable for. The Pareto rule is different for various categories of business.

Examples of How the 80/20 Rule Applies in Business

Detecting Your Target Customers

Thinking about all your different channels of clients, from email lists, social media contacts and website visitors, you probably have thousands of contacts on the prospective and client records. Figuring out who your best target audience are is important. Think about who you want to work with, who will benefit most from your services, frequent buyers or people that were very generous when it came to making a purchase.

Out of your best customers, you can probably figure out who your target audience are. Make a list, and put 10 of your clients/prospectives’ names onto it. An example of finding the perfect customers for you is to start from the top, put those who pay on time here and the ones who take a long time to get back to you on the bottom.

The top 2 in that list are your 20%, so you should solely focus on providing them with all your effort, whilst the remaining 80% can be ‘cut loose’ as they say. A way you can do this is by not renewing their contract at the end of the year, for instance.

Think about clients who pay you the most. These will be at the top of your list, which is where your 20% of maximum effort should lie. It may sound harsh, but they are helping you grow your business the most by providing you with the profits, so they need your best work. The remaining 80% are the clients and prospects who want work done cheaply and are not looking to help you as a business. The process of elimination here is putting your audience into a small selective, and the ones who need/benefit from your service the most should get all of your effort.

Locating Customers Geographically

Paying special attention to your analytics and figuring out where your best clients are coming from is another step you can take to improve your business operations, using the 80/20 rule.

For example, here at McCall Media, we could have dealt with the whole world! Targeting 8 billion people is ludicrous! Even the whole of the UK is still too sizable. You are using the machine gun approach, hoping that you’ll target the right people. We encourage you to use the shotgun method that we have discussed instead. Choose places you know your target audience will be, and go off of your past information to assist you. We have looked into our statistics, and then applied Pareto’s 80/20 rule in our own operations.

For us as a business, because we offer remote and in office services within the Milton Keynes/Buckinghamshire area, we have selected the 3 counties near to it to locate our best customers. Narrowing it down from 80% of the whole world, to the 20% within these 3 counties accommodates us in working with the people we want to be working with.

An extra advantage of working with businesses nearby to us, physically, means that word-of-mouth promotion is encouraged between B2B businesses. Growing your client base is encouraged with this method.

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Earning The Most Profit

Obviously running a business is not all about the profits made. You want to enjoy the fact you are helping your clients and educating them on a matter they aren’t too familiar with. However, to run the business successfully, you need the most amount of money coming in as possible to aid your journey. It really is as simple as that.

Earning a big profit is often utilized by following the 80/20 concept. like we mentioned earlier, the wealthiest and most triumphant business owners religiously follow this principle in day to day life, not only in business.

We’ll provide you with an example to understand this idea. Lets say you offer 25 services to your clients, this could be anything from a physical product to a YouTube video, whatever you think your clients will benefit from. Then, choose the top 5 things that earn you the most amount of profit or benefits your business the most, and are the easiest to create with minimal effort.

You have split the services you provide into the 80/20 rule roughly, it will rarely be exactly that percentage. Choosing the 5 that benefit you the most allows you to focus your time, money and effort and in the long run, will benefit you the most.

If you have a YouTube Channel and it contains 100 videos, looking at the top 20 performing ones, notice what you think made them successful. Was it the topic it was on? Maybe it was the way you styled your video? Once you’ve got some ideas, you can now create more content based on this knowledge and what you know will be successful for you in the future. In some ways, this is re-purposing content, which we have made a blog about here.

Using the Underrated 80/20 Pareto Technique

Generally, the 80/20 Pareto rule can be used to create and solidify your business framework. It can tremendously do wonders in your marketing and sales teams – meeting your objectives couldn’t be easier when you follow this simple rule. No matter what part of your business you want to improve, it may be worth your while adopting the principle in various areas, from sales and marketing like we mentioned, as well as customer service or the ones who are tech sector.

This technique is so underrated, but it has the potential to drive your business forward for years to come.

Free Info Graphics To Aid Your Understanding

We have created some unique and easy to read infographics that you can work from and use within your own business operations. These can be found in the McCall Media Club House, alongside many other tips, tricks and resources to help you grow your business.

Simply create a free login, gain your guest pass, which only takes a minute, and you will be able to find the free resources, helping you reap all the benefits we have mentioned above.

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