Deciphering the 80 20 Rule

80 20 Rule

Today, I want to really break down and decipher just what the 80 20 Rule can mean to you when it’s used properly and gain much needed leverage for your results.

I just want to say that there comes a time in everyone’s life when they really need to take stock of what works for them.  Not only that, but you need to ask yourself, “When am I most productive” or “When Am I most Profitable?” or “What Really Works for Me?”

The 80 20 Rule or more commonly known as Pareto’s Principle states that, “for many events, roughly 80% of the effects come from 20% of the causes. “   Let’s break it down even more – ‘80% of the effects’ in the last statement can be translated as 80% of the results and ‘20% of the causes’ is 20% of the actual work performed.   This goes hand in hand with my theory that you perform the harder work to a larger degree to capitalize on the bigger piece of the pie.

In more simple terms, let’s say you have a highly profitable business.  In that business, the 80 20 rule could dictate that 80% of your revenue comes from just 20% of your clients.  This could mean that you may have to ‘fire’ or make more profit from your much less unprofitable clientele.  It’s a golden ticket if you think about it.  If you take the time and really interpret where the 80 20 rule can work for you, it will really make a world of difference for more return vs. less work put in.

I’m a big follower, like millions of people for Tim Ferris and his 4 hour work week book and lifestyle design.  Tim in his daily living seems to employ everything positive about living the ultimate outsourced lifestyle that basically is like the 80 20 rule on steroids.  If you haven’t yet read this book, I really recommend it as it will simply do away the notion that you must work harder to see more results. Really and truly, the 80 20 rule is about living your life abundantly with less work if you would like to view it that way as well.

I also came across a wonderful post detailing how the 80 20 rule can really transform your life when put to good use.  In Yaro Starak’s, blog post, ‘What Is The 80/20 Rule And Why It Will Change Your Life ‘, he really does a good job in defining the Pareto principle and Yaro is living proof of what you can accomplish when you put this principle to the best possible use within your own life.  It’s all about leveraging out what can be outsourced to others in terms of mundane tasks in order to get the greatest result with less effort from yourself.

A Real Life Example

To give you an even more real life example, take for instance you do a lot of routine things yourself.  Let’s just say that your time for the sake of this example could be worth $100 per hour when you are most productive.  Also, let’s pretend you have a leaky roof and decide to attempt to fix it yourself.  If you were to attempt to fix this leak, it could take you let’s say 2 hours to repair (or $200 of your time).

Now, on the other hand, if you employed the 80 20 rule and hire out an experienced roofer to perform the repair.  If he fixes your roof for $60 and it was done in an hour, effectively he saved you $140 of your time not spent and in less time ($200 from above – doing it ourself and subtract $60 for the professional repair done in 1 hours time).  Do you see exactly why you should be getting a lot more excited about employing this principle within your daily life?

How I Will Employ the Pareto Principle

I personally have started putting this principle in place in many areas of my life and seeing a lot more results with a lot less effort put out.  The power thing about the 80 20 rule is that you are banking on the expertise of others – Standing on the Shoulders of Giants, so to speak.  If it takes me a lot longer to learn something when I could get a service person or a professional to do the task lickety split, it’s well worth going ahead and getting it that way.

I use the Pareto principle because I know that it will get me eventually to the goal of being 100% financially free through persistence.

Don’t Be A Control Freak

The biggest people that tend to lose out in not reaping the rewards of the Pareto Principle are those that want to always do it their way or the highway.  These personality types usually end up doing mundane and time intensive tasks themselves and get minimal return on investment of time, effort and other resources spent.  Although they may enjoy some ok results, it would have been far more beneficial to put the Pareto principle to work.

Don’t just do time sucking tasks for the sense of doing them.  Have a purpose behind every thing you do and know how will capitalize on the result by using the 80 20 rule to your full advantage.

Here’s a quick snapshot of why you should implement the Pareto Principle:

  • Better and more efficient use of your time
  • A better business strategy if you are an entrepreneur
  • A more systemized approach
  • The best trade off for effort vs. greater results
  • Better ROI in terms of time and profit
  • Improved Lifestyle because of better choices
  • Leaving the specialized work to the professionals, so you can be more productive

These are just a few ways on how you could this strategy work for you.  Put it in place and measure your results, I know you will be impressed with the improved result.

Already using this principle to your advantage?  Join me in the discussion by commenting on this post.

 

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Category: Financial freedom, Personal Development

  • The Pareto Principle shows that it’s more effective to work smarter instead of harder. I don’t use the Pareto Principle usually but when I catch myself doing a lot of the same tasks, I step back and ask myself whether there would be a more effective way to reach the same outcome. Usually there is – I’m just ignoring it. It frees a lot of time and is a lot more fun to act effectively instead of just being busy.

  • Anonymous

    That’s good advice there Alice. I use to do mundane tasks over and over and when I started applying the 80 20 rule, i gained massive leverage and saved much time. There’s so many people that think because they are busy, they are productive which is not usually true. Thanks for sharing.

    Dwight Anthony

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