The 80/20 Principle for Business Productivity

 I’m reading a fascinating book, the Four-Hour Workweek by Timothy Ferris, which makes glamorous the idea of leisure travel and other pursuits while your business runs on autopilot and your income flow is substantial. While this idea might seem far fetched to many business owners, the book has a lot of great general business advice to maximize efficiency and free up valuable time for other pursuits.

For one, Ferris talks of "Pareto’s Law", also known as the "80/20 principle", a mathematical formula that states that, for many events, 80 percent of the effects come from 20 percent of the causes. This principle has been applied to a wide range of activities and is often been applied to business, in the form of: 80 percent of sales are from 20 percent of clients.

Ferris gives his own personal account of the 80/20 principle he encountered in his business. When he asked himself: "Which 20 percent of sources are causing 80 percent of my problems and unhappiness? and "Which 20 percent of sources are resulting in 80 percent of my desired outcomes and happiness?" He proceeded to stop contacting 95 percent of his customers and fired two percent, which left him with three percent of producers to profile and duplicate. He found that out of 120 wholesale customers, only five were bringing in 95 percent of the revenue.

"I was spending 98 percent of my time chasing the remainder, as the aforementioned five ordered regularly without any follow-up calls, persuasion, or cajoling," Ferris writes. "In other words, I was working because I felt as though I should be doing something from 9-5."

As our business expert David Finkel has set about transforming our two BIG Business winners, he has asked them to apply the 80/20 principle in their business and find out what activities they perform produces the greatest results, while outlining the 80 percent of activities that take up time and produce the least amount of results. David calls the 80 percent activities D level activities, and suggests that business owners should eliminate, differ, or delegate these activities.

We can all apply the 80/20 principle in our own lives in one way or another, by identifying the actions that produce the greatest rewards and eliminating or delegating those other tasks that take our time and energy and produce little results. As I mentioned in my previous post, e-mail, surfing the Web, IM, phone conversations, can distract us and pull our attention away from more productive activities. Even when these activities may seem like important business-related tasks, they can flood our schedule and load us with unnecessary work. Being overwhelmed can be nearly as unproductive as doing nothing, while prioritizing and doing less is often being more productive.

As Ferris notes: "It’s easy to get caught in a flood of minutiae, and the key to not feeling rushed is remembering that lack of time is actually lack of priorities."