The Pareto principal, or the 80/20 rule, is something that will either fascinate you or creep you out. It’s one of those things that “you can’t unsee”. When you learn what it is and how it shows up all over the place, it can be a powerful focus tool for you in both your personal and professional life.

The 80/20 Rule is Born

The 80/20 rule is also referred to as the Pareto principal. Pareto is the last name of the Italian economist, Vilfred Pareto.

On the surface Pareto is this old dude from history, in that he lived a long time ago, in Italy and France, and was an economist. Kind of dry in my opinion, until . . .

In his studies and research, he showed that approximately 80% of the land in Italy was owned by 20% of the population. Hence, the 80/20 title.

The Pareto principle states that for many outcomes roughly 80% of consequences come from 20% of the causes. Now, this is not hard and fast, sometimes it might turn out to be 90/10 or 75/25 but the numbers usually lie very close to this. You may be surprised.

“80% of the consequences come from roughly 20% of the causes.”

Vilfred Pareto

Economist, A long time ago. . .

The 80/20 Rule is Everywhere

It’s like the wind!

In computer science, for example, Microsoft noted that by fixing the top 20% of the most-reported bugs, 80% of the related errors and crashes in a given system would be eliminated. Also, in general 80% of a certain piece of software can be written in 20% of the total allocated time. Conversely, the hardest 20% of the code takes 80% of the time to write.

In one study in health care in the United States, it was found that 20% of patients used 80% of health care resources.

In baseball, the Pareto principle is reflected in Wins Above Replacement (Wikipedia dfn: an attempt to combine multiple statistics to determine a player’s overall importance to a team). “15% of all the players last year produced 85% of the total wins).

Interesting isn’t it?

If you look at your closet you probably wear 20% of your clothes 80% of the time.

How 80/20 Rule Applies to Business

In business this principal is vitally important because what it translates to is that roughly “80% of sales come from 20% of your clients”.

Does that sound crazy? Check out your numbers and see how close it is.

Let’s stop and think about that top 20% for a moment.

We know that it is 6-7 times MORE expensive to acquire a new customer than it is to keep an existing one. We also know that 20% of the customers produce 80% of the income.

What does this say about the value of that top 20%?

They’re REALLY valuable, right? Holy cow!!

Most businesses have not identified their top 20%. If you have an idea, you’re ahead of the game.

If you don’t have access to financial numbers where you work, you can do some “shoot from the hip” guessing that will garner you some fairly accurate results.

Putting into Action

Grab a piece of paper and just list 5-10 customers that frequent your business often. You probably know their names and even some likes/dislikes/shopping preferences.

Start brainstorming how to serve them really, really well. Get your staff involved! Have fun with it because making these connections is what drives business. It’s the fun stuff.

To help your team make a consistently excellent First Impression, download this free training tool to help! It’s like painting by numbers.

I guarantee you’ll have amazing results when your staff applies these 3 steps to making a great First Impression.