Applying the 80-20 Rule to Your Business
“A principle that asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event.” ~ Investopedia
Maybe you’ve heard of the 80-20 rule, also known as the Pareto Principle. This rule maintains that 20% of your efforts results in 80% of the outcomes. When one is seeing a good outcome from their efforts it is awesome but when it is the opposite and one only sees a bad outcome from their efforts it’s probably time to rethink and re-strategize. The same can also be said if you are expending more than 20% of your efforts; it’s time for a change.
The goal in business (and all efforts in life for that matter) should be to identify the things that are the most productive and make them the priority. It makes sense, right? Who wants to spend extra time, money, and energy on something that doesn’t produce much income or positive outcome? A business certainly can’t survive doing that. As business owners we want to make the most money in the most productive and efficient manner possible.
This isn’t to say that you should ignore anything that is not making you money, but it may be time to rethink the efficiencies and how to go about them. However, if you find that some products or services in your business aren’t making you money, it may be time to remove them. A good way for any business owner to figure out what is making them the most money is as simple as an Excel spreadsheet. Make a column for each source of revenue and another column for the cost associated with that income. The last column is a down and dirty income for that item. This simple method certainly will not give you the details of all operating costs or anything that can be used for official financials but what it does do is give you valuable insight on where to focus your energies. It seems a bit antiquated, but it is a good way to force us business owner to take a hard look at each revenue source.
The Investopedia article, gave a good example of how a blogger used web analytics to identify problem areas. Ultimately, she was able to adjust the blog’s design and persona to align with her top 20% target audience. The analysis confirmed that the blog’s biggest problem was its marketing but by applying the 80-20 rule she was able to understand her audience better and target her top 20% of readers. After making appropriate adjustments, her traffic to her site rose by more than 220%!
If it’s time for you to re-think your marketing strategy and you need help making sense of web analytics and how best to apply them to your business, schedule an appointment with Cyberspyder Marketing Services today, 479.782.0005.
Cover Photo by Austin Distel on Unsplash