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Exploiting the 80/20 principle print Print

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The 80/20 rule offers many useful insights into how best to spend your time and resources. This guide explains the rule and then applies it to various aspects of your business to show you how you can focus on leveraging your efforts for maximum results.

What is the 80/20 Rule?

The 80/20 rule is all about leveraging your time to produce the most productive results. The rule was discovered towards the end of the 19th century by the Italian economist, Vilfredo Pareto. Pareto observed that in Italy 80% of the land was owned by 20% of the population. He then went on to observe this same 80/20 proportion in other aspects of life as well.

Since Pareto's time others have extended the 80/20 rule to many other activities. This guide applies the principle to business life and explains how it can help you make more productive use of your time and resources. The actual percentages (80% versus 20%) may not always be precise, but the validity of the leverage principle - that a minority of input produces the majority of results - is well proven.


Implications for your business

We all have limited time limited energy and limited resources. An understanding of the 80/20 rule teaches you how to use these resources to best effect.

20% effort leads to 80% results

Managing your customers

Applying the 80/20 rule to your customers reveals that 80% of your income comes from 20% of your customers. This insight has clear implications for your customer management. It follows that you should spend 80% of your time on these top 20% of your customers because they produce 80% of your sales. These are the customers you need to:

  • Retain through customer loyalty programmes.
  • Keep in touch through a newsletter, etc., at least once every 90 days.
  • Build long-term relationship with.
  • Ask first for customer referrals (you want more customers just like them).

Customer problems

Conversely, 80% of your customer problems come from 20% of your customers. So consider letting go of these customers and concentrating on forging productive and enduring relationships with the 20% who give you most of your business.

Revenue from products and services

Analyse your sales and you're likely to find that 80% of your revenue comes from 20% of your products or services. Conclusion: think about getting rid of some of the peripheral products or services that are not generating sales. For example, in a retail shop situation, stock turnover is one of the keys to profitability. The more times a year you can turn over your stock, the more profitable your operation is likely to be. To achieve this, efficient retailers aim to eliminate slow moving items and concentrate on the core lines that sell quickly. Monitor stock turnover through key ratios. You can learn about these in our article Checking the health of your business.

Time management and tasks

20% of the activities on your daily list of things to do will produce 80% of the measurable results. Conclusion: it is important that you prioritise your daily list so that you focus 80% of your time on this 20% list. Consider the measurable outcome of each item in moving your business forward or creating revenue. Do the difficult tasks first, as long as they are part of the top 20%.

Marketing and advertising

20% of your advertising will produce 80% of your sales. Conclusion: to find out which 20% is really working, you must measure the results. If you don't monitor your advertising you'll never know which 20% is doing the work! As famous management consultant Peter Drucker has emphasised repeatedly, "You can't manage what you don't measure."

Sales team effort

20% of your sales team will produce 80% of your sales. The key question is: why do they do so much better? Analyse their methods and get this top 20% to train and teach others how they produce their superior results.


20% of your phone calls will produce 80% of your sales. Put another way, 80% of your phone calls will produce only 20% of your sales. It is obvious which you should concentrate on. For more information, see our article Build your sales through successful telemarketing.

Business meetings

80% of the decisions you reach in business meetings will come from 20% of the meeting time. This means that the remaining 80% of the meeting time is largely wasted. So your goal should be to eliminate the time that is unproductive.

Interruptions and putting out fires

Analyse the people who interrupt your work and you'll likely find that 80% of your interruptions come from 20% of your staff (or others). Similarly, you're likely to find yourself spending 80% of your time putting out the same 20% of fires (causes of distractions from your mainstream work).


Keeping 'in the zone'

The best way to exploit the 80/20 rule is to make sure that you keep in the 20% zone that produces 80% of results. This means being vigilant about diversions and time wasting activities.

Take action if:

  • You're always fighting fires ('urgent tasks') that distract you from core activities.
  • You let staff load problems onto you that they should be doing themselves. See our article The importance of delegating.
  • You know that the tasks you're doing are not in the 20% zone and are taking longer than you anticipated. For more information see our article Growing your business past yourself.

You're in the 20% zone if:

  • You're able to delegate routine tasks to others and encourage people to come to you with possible solutions, not simply problems.
  • You have clearly identified the 20% productivity areas (the core activities) in all aspects of your business.
  • You get everyone, including yourself, focused on these key drivers. Take small steps if necessary in this re-focusing effort, but take the steps every day.
  • You treat your time like gold and eliminate or delegate unproductive tasks.
  • You end the day with a sense of real achievement.



The 80/20 rule offers important insights into how you can leverage your time and effort to produce the maximum results for the least effort. Working though this guide should enable you to identify areas in your business that you can streamline, change, or make improvements.



Useful ANZ Biz Hub articles include:


Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit your nearest ANZ branch

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