The Pareto Principle (80/20 Rule)

The Pareto Principle (80/20 Rule)

The Pareto Principle is about the uneven distribution of just about everything. It’s commonly used in business to note that 80% of results come from 20% of the effort and that 80% of revenue comes from 20% of the customers.

There are two things it’s important NOT to take away from this concept.

It’s utterly coincidental that 80% and 20% add up to 100%. Those numbers are a relic of the source of the rule. It’s also important to note that they measure different things—effort and results or clients and revenue—so adding the percentages wouldn’t make sense in any real-world application.

80% and 20% are numbers that are also relics of the source of the rule. The rule is applied to so many varied efforts in varied industries that it’s impossible for 80% and 20% to be accurate for all of them.

What’s important to take away from the rule is the concept of uneven distribution. Effort is not evenly rewarded. Clients aren’t equally profitable. Content isn’t equally effective.

Why is this important? As new entrepreneurs, you’ve got a million things to do, and they aren’t all going to have the same impact on the bottom line. You should put a little thought into whether they’re big-impact things or small-impact things before you spend the time.

In the early going, concentrate on the things that are going to have a large impact for the time and effort it takes to do them. Get your site up. Get your first offer down. Build a funnel. That’s the core of your business and getting it in place has a huge impact.

Once it’s up and running, you’ll want to review everything and optimize for conversion. Those details are going to be unique to every audience so you can’t do it before you have an audience, and they’re going to take time and effort. You’ll test and tweak and test and tweak and probably spend more time testing and tweaking than you did creating in the first place.

That’s normal.

You probably won’t get an increase in results that are comparable to what you got from originally creating everything. If creating everything gets you a 10% conversion rate, optimizing might get you to 15% in twice the time.

That’s also normal.

There are exceptions, of course.  Sometimes there are tweaks that make a huge difference. They’re just rare.

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