How to Apply the 80/20 Rule to Your Business
The 80/20 Rule, also known as the Pareto Principle, states that roughly 80% of outcomes come from 20% of causes. In business, this concept is powerful for identifying what activities, customers, or products yield the greatest results.
The problem is, it’s easy to forget and easy to ignore. When we make a to-do list, we give the list some order but generally treat each item on the list as if it has equal importance. Even worse, we will sometimes then go through and cherry pick certain items that are either easier to do or that we know we can check off, just to make ourselves feel good, even though we know those items aren’t really making any impact.
I am guilty of this myself, and I am sure I am not alone!
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The problem is the nature of things seems to be to expand, not focus. We accumulate stuff way more easily than we get rid of it. We add things quickly but discard slowly.
The 80/20 rule reminds us that most of what we expanded into isn’t helping the cause and doesn’t deserve equal weighting of our attention.
It is most often applied to sales and marketing, but it really is true across all facets of the organization, and where all the people working spend their time.
That isn’t to say you shouldn’t try new things or consider expansion but it does mean you should carefully measure those experiments and make sure you are cutting back as much as you are adding on things that take time and resources but aren’t nearly as effective as your top performers in whatever area you may be looking at in that case.
Here’s how to put the 80/20 rule to work in the various areas of your business right now:
- Sales & Revenue
Identify the top 20% of products or services that generate 80% of your revenue.
Focus on promoting, improving, and selling these high-performing offerings.
Consider discontinuing or optimizing low-performing ones.
- Customers
Find the top 20% of customers who bring in 80% of your revenue or profits.
Invest in retaining these high-value customers (loyalty programs, better service).
Consider minimizing time spent on difficult, low-value customers or how you can convert them to higher value clients, or else filter them out prior to them engaging at all.
- Marketing
Track which 20% of marketing efforts bring in 80% of leads or conversions.
Double down on the highest-ROI channels (e.g., email, SEO, referrals).
Cut or revise underperforming campaigns.
- Time Management
Identify the 20% of tasks that produce 80% of your results or impact.
Prioritize these tasks daily, delegate or eliminate low-impact ones.
Consider using time-tracking tools to evaluate where your time really goes.
Once you’ve fixed your own time management, help your employees do the same.
- Customer Support
Discover 20% of issues that cause 80% of support tickets or complaints.
Fix root causes and improve processes, documentation, or product features.
You may also identify the small group of clients who consistently cause the majority of your headaches- if you can’t remedy the issues they are complaining about it may be worth considering firing them as clients instead!
- Inventory & Supply Chain
Focus on the 20% of SKUs that account for 80% of your sales or stock movements.
Optimize purchasing, stocking, and logistics around those core items.
Reprice, renegotiate your cost, or remove the ones that aren’t pulling their weight and can’t be brought up to a floor threshold that makes sense.
- Employees & Teams
Recognize which 20% of employees or teams drive 80% of performance.
Invest in their growth, replicate their habits, and empower them further.
Use any identifiable characteristics they may have to improve your recruiting, hiring, and training processes to get more of the kinds of employees who meet the same standards.
The 80/20 rule isn't about being exact but about recognizing imbalance. Once identified, you can focus resources where they matter most — maximizing impact while minimizing waste.
Start with yourself and where you are spending your time and energy, then go through the areas of the business above to identify in each one where there are areas for improvement. Each incremental tweak and improvement moves your business closer to being as optimized as possible. Then start again at the top and do it again. Make it a regular practice.
Businesses are either growing or dying; there really is no standing still or cruising alone that lasts very long. Given this, you want to make sure your efforts at growth are focused on the things that matter the most, and this is where this rule really comes into play. Let me know how the 80/20 rule is working for you!
