The Pareto Principle - 80/20 Rule

In 1897, Italian economist Vilfredo Pareto, in his study of the patterns of wealth and income, observed that the distribution of wealth was predictably unbalanced. He first discovered this pattern in 19th-century England and found it to be the same for every country and time period he studied. Over the years, Pareto's observation has become known as the 80/20 principle.   This rule of thumb holds true in almost every area of human activity.  Whether it's sales, wealth or overall productivity it seems that 80% of activity is generated by 20% of the participants.

The most common example being the top 20% of the salespeople earn 80% of the commissions.

Another is that 20% of the authors sell 80% of the books.

It seems that 20% of the population controling 80% of the wealth is actually an understatement.  In 2003, in the US and Canada, 2.5 million people control US$8.5 trillion in assets.  Both of these were growing at a double digit rate.

And most importantly to you, 20% of your daily activities generate 80% of your success and income.

Here is my question to you:

Since 80% of our results are produced by only a few things that we do each day, why do we waste so much time on those other activities?

I think many of us actually have a sabotage mechanism that keeps us from achieving high levels of success.  It's something that I have learned to overcome in the past few years and it helped me build a much more successful business.

You may want to spend a few minutes examining your daily routine to see exactly how much time you are spending on your most important tasks. 

Also, pick up a copy of The 80/20 Principle by Richard Koch.  It's one of the 5 most valuable books I have ever read, so it will be $10 well spent.  One interesting thing that I have applied quite well is what I call the Law of Concentrated Effort.  When I find something that works, whether it's a particular search engine keyword or a new marketing splash page I focus as much advertising or marketing effort as possible on it.   As long as the situation remains reasonably profitable, I continue to focus as much attention to it as possible often at the expense of other less profitable projects.

We often spend too much time on things that aren't profitable simply because we have made commitments to others that we are trying to honor.  Often it is better to simply be honest with those people and tell them that you can no longer justify spending time on a losing proposition.  Most times people will be understanding of the situation and will agree with your decision.  If the situation involves money that has been paid to you, you may want to give them a partial or full refund just to keep the relationship intact if that is required.

The most important thing is to "Cut Your Losses and Move On To Something Profitable"!  For more on that topic visit the article What To Sell Online.