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How to Use the 80/20 Rule to Improve Your Business

There is a concept called Pareto’s Principle or the 80/20 rule that governs how businesses make their money. In short, it says that 80% of a business’s profits will come from 20% of their customers—but it doesn’t just stop there. Another way to see the 80/20 rule is that we spend 80% of our time on things of low importance and 20% on things of high importance. In an ideal situation, we would want to spend 80% of our time doing the most important things and only 20% of our time doing low-value activities, but this often isn’t the case.

This is especially true of people who own small businesses. We hire with our gut—people that we like. We then spend too much time training those people, only to discover that they are underperforming. This 20% of our employee population causes 80% of the problems in the business. That also means that you spend 80% of your time cleaning up other people’s messes, even if there are much more important things to get done.

There is a way to make this rule tilt in your favor, however. Instead of spending 80% of your time on the employees that aren’t achieving, start spending 80% of your time with those that are successful. Why? Because this will compound their already impressive success for extraordinary growth. Think of it this way: if you were to plant a garden, would it be more beneficial to spend your time caring for and cultivating the healthy plants or trying to rejuvenate an unhealthy plant that you know is going to die? Of course, you would much rather spend your time improve the already great plants, not trying to save something that’s going to die no matter how much time you spend with it.

So, what do you do about those low-performing individuals? It’s going to sound harsh at first, but the reality is that you need to cut them loose. Those that don’t pull their weight for your business both drag your business down and create more work for your employees that actually do achieve and succeed. Once you have freed up 80% of your time, you can put it towards those high-value tasks and people and start saving the other 20% for the low-value tasks that used to suck up all of your time.