Have you ever heard about the 80/20 principle? It goes something like this: 80% of your time is spent on things that drive 20% of your revenue while you only spend 20% of your time on the parts of your business that drive 80% of your revenue. Seems a little backward doesn’t it? The same principle can be observed in all facets of life: church, volunteer organizations, businesses you deal with, or your own employees.
In one of our past businesses, we decided to concentrate only on the 20% that accounted for 80% of our revenue. We soon realized that most of our time had been spent handling the affairs of low revenue producing clients because they required an inordinate amount of attention. From that point on we were determined to spend the majority of our time building the 20%, instead of being distracted with the “noise” of the other 80%.
First we identified those clients and programs that were the most likely to contribute to revenue. Then, we avoided diluting our own efforts with clients and programs that would produce little to no value. It can be a bit intimidating, as it means that some are going to get unlimited help and support, while others will only receive little assistance. Although every customer was important to us and we were 100% committed to providing the services they paid for, we concentrated on creating processes and procedures that allowed our teams to spend time cultivating things that had real potential.
The incredible effect of focusing your energy toward increasing the 20% is logarithmic. Warren Buffet owes his own success to heavily concentrating on the potential in his business, instead of diluting his efforts with low-value, time intensive distractions.
Review your own business. Is the 80/20 principle working against you? Start using disciplined time management to ensure that you exert the most energy on the things that will provide the biggest return. Be ready to set limits as you discern which activities to ignore and where to focus. It will make a huge difference in your future work productivity and in your personal life.
Food for thought by:
Bruce Benson
Earn.com Business Advisor
Tags: business growth, priorities, productivity, setting priorities, small business growth, time management
August 28th, 2010 at 12:47 pm
We will be reviewing our business to make sure we are concentrating more on the areas that are bringing in the revenue.