- In order to be successful at anything, you need to have a solid foundation for it. Let’s say you wanted to build an online store, you would need a professionally designed website, the cheapest web hosting to kickstart, source products that customers want, and proper applications of digital marketing.
There are many aspects you need to decide.
Similar to being an entrepreneur, there are certain key foundations that you’ll need in your arsenal in order to become a successful entrepreneur. And one of them is how efficient you are with how you approach your entrepreneurial endeavors.
The Pareto Principle should be a familiar term to many entrepreneurs. However, if you’re just starting out as an entrepreneur, then the Pareto Principle is a rule that you should start applying to yourself if you want to be an efficient and successful entrepreneur.
Pareto Principle in a nutshell
Before we go over how the Pareto Principle (commonly known as the 80/20 rule) will help you, let’s take a look at what the principle is and the history of it.
Introduced by Italian economist Vilfredo Pareto in 1901, the Pareto Principle was based on the finding that 20% of the population owned approximately 80% of the wealth in developed countries.
Pareto later applied that 80/20 calculation beyond economics and different aspects of life. From businesses to lifestyle, it became apparent that the 20% of what we truly focus on, will give us 80% of our satisfaction and well-being.
For businesses, that would mean receiving 80% of your sales from 20% of your loyal customers. A blogger might get 80% of their affiliates income on only 20% of their content. You might spend 80% of your time with only 20% of your friends.
As you can see, there are many ways in which the Pareto Principle can apply in real-life situations. But, how do they actually help you become an efficient entrepreneur?
Putting the Pareto Principle into action
The Pareto Principle and its underlying rule of 80/20 can be an amazing tool to help you progress and grow as an entrepreneur. For a better understanding of it, here are some examples in which they can help you improve as an entrepreneur:
Ramping up your productivity and personal efforts
Look, we get it. Entrepreneurs are busy people and as an entrepreneur, you’d like to think that you’re spending your time wisely.
The fact of the matter is, it’s more likely that 80% of your achievements and results come from only 20% of your time and effort.
If you can manage to shift your time and focus on the 20% that truly brings you results, I can guarantee you’ll be a much more productive entrepreneur at the end of it.
Targeting the key revenue and profits generators
One of the basic characteristics of a successful entrepreneur is to be profitable. More often than not, 80% of your revenue comes from only 20% of your clients or customers.
Similarly, when it comes to sales, only 20% of your sales force will generate 80% of your actual sales.
With the 80/20 rule in marketing, you can hone in on the 20% of your business that provides you with 80% of your profits. Instead of losing sleep over every single detail, put your focus on the ones that matter.
Managing your resources and investments
When it comes to managing your investments and resources, you have to come to terms with the fact that only 20% of them will bring you 80% of your results.
Now, does that mean you should abandon 80% of your investments that are not performing? Heck no!
You just need to be wise with how you do it. Give 80% of your effort towards the critical 20% to get the results you want. It’s all about working smart rather than working hard.
Diversifying your management and overall leadership
Your business is going great and you’re experiencing major growth. You start expanding and before you know, you’re overlooking multiple aspects of your company.
At this point, there’s a trap that most entrepreneurs fall into, which is to spend time with management instead of leading their company.
Here’s the thing, being an entrepreneur also means being a good leader but if you spend 80% of your time managing every micro aspect of your business, you’re not being very efficient with your time.
You only have 24 hours in a day, don’t waste 80% of it worrying about issues that your managers can handle. Instead, focus on the vital issues only and how you can take your enterprise to the next level.
The keys to success lie in 80/20
The Pareto Principle is an effective piece of tool that entrepreneurs need to use if they want to be successful in their endeavors. Take the advice above to heart, start applying it to your day-to-day routine habits and before you know it, you’ll be another efficient and successful entrepreneur in the making.