News

The Pareto Principle

Mathematics and sciences were far from my favourite subjects at school (I was more of an arts and languages girl), however, the work of Italian economist Vilfredo Pareto struck a chord.  Complex logarithms and equations aren’t my thing but the sheer simplicity of the Pareto Principle was something that I could relate to. 

As one of the power laws, the Pareto Principal (also know as the 80/20 rule) states that for many events approximately 80% of the effects come from 20% of the causes.  For instance, Pareto’s work looked at economics and wealth distribution and the 80/20 rule still holds true today with the richest 20% of the world's population controlling just over 80% of the world's income. 

It is a great rule of thumb that you can apply to all areas of your life, particularly business. 

Here are some principles commonly used:

  • 80% of your profits come from 20% of your customers
  • 80% of your complaints come from 20% of your customers
  • 80% of your profits come from 20% of the time you spend
  • 80% of your sales come from 20% of your products
  • 80% of your sales are made by 20% of your sales staff

Less is often more. Striving for 100% in all areas of your life including your business, all of the time is exhausting and can often be counter-productive. So why not take the time to apply the Pareto Principle to your life and focus on the few things that are really important to you and offer the greater reward?