Page 187 - Paulisms: Gold Nuggets for Small Business

The 80/20 Rule – The Pareto Principle
I apply the 80/20 rule to nearly everything I do in business. It was theorised by an Italian gentleman, Vilfredo Pareto. Basically, for many events, roughly 80% of the effects come from 20% of the causes.
The best way is to explain it is to give examples.
If you look at all the car manufacturers across the world, 20% of the manufacturers manufacture 80% of the cars.
20% of real estate sales people sell 80% of the real estate.
20% of a franchise network ties up 80% of your time.
20% of car sales people sell 80% of the cars.
20% of homes will be 80% of the value of all real estate stock.
20% of people or tasks at hand will consume 80% of your time.
20% of your time will produce 80% of your results.
20% of New Zealand cities account for 80% of the population.
20% of the chapters in this book will give you 80% of your takeaways from this book.
A training exercise I used to do was to brainstorm on a whiteboard and ask people to name all the car manufacturers. Not models, but manufacturers, for example Toyota, Ford, etc. And then rank them from highest seller to lowest. We would tally the number, for example, 20, and take 20% of that number. In this case we would take the top four. If you look at all the cars sold in New Zealand each year, it always came out very close that four of the manufacturers (20% of the total) sell 80% of the cars.
.2