H ave you ever been interested in becoming a more productive entrepreneur, or learn how to manage your time better? Then you’ve most likely come across the Pareto principle before, also known as the 80/20 rule.

If you’ve never heard of it, you’ll learn more about it in this post and in the video further down. When I learned about this concept and saw how it was already working inside my business, it opened my eyes to a whole new world of efficiency and productivity.

The Pareto principle states that in any situation, 20% of the inputs or activities are responsible for 80% of the outputs or results.

The principal was named after an Italian economist will Vilfredo Pareto. He first observed this law in his own garden. What he noticed was that 20% of the peapods generated 80% of the healthy peas. This observation led him to discover that 80% of land in Italy was owned by just 20% of the population. We can see this concept everywhere in our daily lives. For example, you wear 20% of your clothes 80% of the time. In a book, 20% of its pages contain 80% of the most important information. In business, 20% of a company’s customers produce 80% of it’s revenue. The Pareto principle shows up over and over again in almost every field, but the inverse is also true. This means that the other 80% is only generating 20% of the results. However, you should note that this is not a universal law and it can differ in many situations. It’s not always going to be 80/20 it could be 70/30 or 90/10 but the principle still makes sense. The point is that the majority of results come from a minority of causes and the minority of results come from the majority of causes.

How Can You Use The Pareto Principle?

Time is our most precious resource. We all have the same amount of time in our day, but most of us don’t use that time efficiently. There’s a difference between being busy and being productive. Most people think that working more hours will get them more results. However, it’s not about the time you put in. It’s about how well you spend that time. If you haven’t applied the Pareto principle in your life and business yet, you’re most likely just being busy. However, when the principle is utilised correctly, it enables you to do more by doing less.

how to explain the pareto principle

In business, you will generally find that 80% of your income is generated by just 20% of your clients. This is certainly true for my businesses and it’s a really useful insight to have as a business owner. You may also find that 80% of your time is usually taken by the same 20% of clients.

If you go back to a previous example, I said that 20% of a book will give you 80% of the information. That also means that 80% of a book will only give you 20% of its value. Let’s say it takes you ten hours to read 100% of that book. By applying the Pareto principle, you know that 80% of the most important information can be found in just two hours. Yes, you could go deeper and learn more in-depth if you want it to, but note that you will most likely have to spend an extra eight hours to get that extra 20% of the information. It’s up to you to decide if you think it’s worth it. If you’re studying for an exam, you can also take advantage of the 80/20 rule. An exam, in any subject, never tests on 100% of the curriculum. You can get a good grade by trying to identify which 20% of the curriculum is the most important or likely to be tested on. You can do this by looking at past papers and exam board guidance and focus your effort on the bits that will get you the highest result.

Studying the right topic for two hours will get you a much better grade than studying the wrong topic for a whole week. Again, you could read every single page of a textbook and get that 100% of knowledge, but if being a top student is not your priority, then it just might not be worth your time. You can even see the Pareto effect in your friendships. What you’re most likely to find is that 20% of your friends give you 80% of fulfilment and joy that you get from social interactions. The other 80% of your so-called friends are only giving you 20% fulfilment. Now, you don’t have to cut away all those friendships completely, but you don’t have to spend an equal amount of time with them.

It can be applied to almost any area of your life, whether it’s business or free time. If you can identify the 20% that produces the greatest outcome, you can spend more time doing that to create an even greater payoff. It also helps you cut0back on 80% of things that waste your time, which creates only 20% of the results. It encourages you to think efficiently and focus on what is actually important.

Think about how you can apply the 80/20 rule in your business and where this is glaringly obvious. It will highlight the things that you could double-down on to get more of the results you want and the things you should eliminate which are taking up more time than is worth.