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A quick guide on how to use the 80/20 rule to benefit your business

Munira Rangwala
3rd May 2017
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The 80/20 rule, also known as the Pareto Principle, states that 80 percent of the work you do leads to only 20 percent results and the remaining 20 percent of the effort you put in leads to 80 percent profits. A lot of people are sceptical about this principle, and if you're one of them, we hope to eradicate any fears or apprehensions you harbour regarding this principle.

Image : shutterstock

Image : shutterstock

You might have observed that the 80/20 rule applies easily to some of your projects. There might be some projects that you will complete efficiently enough to impress your manager thoroughly, and there might be others that take a lot of time to complete, the rewards for which will be negligible. By focusing on the projects that give you the best results, you will not only be able to improve your efficiency but also manage to land a promotion with a fat raise.

The same rule applies to entrepreneurs too. Budding businessmen will find that when they hustle for every rupee, they feel burned out and tired, and the profit margin isn't too high either. Working long hours isn't the secret to boosting your earnings. You need to figure out which business of yours is sapping the most energy out of you and giving you little profits in return and which business requires minimal effort from your end yet rewards you highly. For example, if you are a website developer who puts in 80 percent of your time and effort into growing that business and yet receive negligible profits from it, it's about time you put your efforts elsewhere. On the other hand, if you dedicate only 20 percent of you time to writing and gain 80 percent of your revenue from it, you should focus your energies on writing rather than website development.

Once you have successfully identified what works for you and what doesn't, you need to devise a plan of action to shut down the business that's going nowhere and boost the business that is bringing in a major chunk of your monthly revenue. Don't wait for one business to completely shut down to focus your energies on the other, more profitable one. Going back to the previous example, the clients from your website development business aren't going to disappear overnight. You'll have to make the transition journey smooth for them as well. It is a gradual process. Similarly, acquiring new clients for your writing business will also take time. Set both the processes into motion simultaneously.

Economist Vilfredo Pareto completely revolutionised how businesses should be conducted with his 80/20 rule. If you are able to implement this principle correctly, your business will benefit majorly. You will not see dramatic results almost instantly, but at least you will be able to pin-point what's working for you and what isn't. If something works well, repeat it and if something doesn't, discard it. That's the best rule to follow in life and business.

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