Applying The Pareto Principle To Your Business (80/20 Rule)

When people start a business, they think that the more they work, the more money they can make. But that is not always the case. Imagine being able to work less hours and make more money in your business. Well, it's entirely possible. And this is something that I strive to do in my own life and with my own business is make as much money as I can and work the least amount of hours that I possibly can. I learned that from one of my mentors, Graham Cochran. He's a great ideal for me in terms of that. But one of the biggest principles that I have learned, not just from Graham, but I've just learned in general over the years, is the Pareto principle. And it's really helped me and made a big impact in my life, but also in my business. And specifically, we want to go over how to use this principle inside of our businesses to help us work less hours, earn more money. So it's also known as the 80/20 rule. But basically what we're going to go over is what the Pareto principle is. We're going to dive a little deep into what it is exactly. And then I'm going to share with you some examples specifically to your business. And then at the end, we're going to wrap it up with how to actually apply this principle to your business. Let's dive in. Welcome to episode number 23 of the Profit Your Knowledge podcast. I'm your host, James Allen, here to help you turn your knowledge, passions, and skills into an online business so that you can be your own boss, make a difference in this world, control your schedule, and ultimately live a life of freedom. And hey, if you're really interested in kickstarting the process of building your online business or even just starting it from scratch, I have a special gift for you. And this is really going to be helpful for you, especially if you want to apply the 80/20 rule to your business. One of the best ways to do that is to learn from people, or at least just someone who has had success. They don't need to be the biggest person in the world, but as long as someone has been able to get results in an area that you want to see results in and they're willing to pass down information to you, you might as well take advantage of it. So today I wanted to share with you a 5-step action plan that I created specifically for you to help you sell your knowledge, passions, and skills online, even if you don't have a business idea. This guide is going to walk you through specifically how to create passive income and build a business that can work for you so you can spend time elsewhere, whether that's working with clients or doing your hobbies or hanging out with family and friends, whatever it is you want to do. So if you want to earn your first $100 or more in passive income and start building a business with a passive income style to that business, then I highly recommend you pick up this guide. It's going to walk you through how to find your perfect business or just your product idea if you already have the business idea. And then we'll go over how to find your target audience and identify who that is and what they find valuable. It's all about building a business on generosity. I'll even walk you through how to create products, specifically the best type of product or products to make, and then what to price them around or price them for and sell them for. And at the end, we're going to wrap it up with how to actually automate the entire process. And that last piece is really what's going to help you create passive income. So to get the guide, just go to ProfitYourKnowledge.com/guide, or you can click the link in the description of this episode as well. It's my gift to you. It's actionable. It's free. It's in the description. So let's dive into the 80/20 rule or the Pareto principle. What is the Pareto principle or the 80/20 rule? There is an Italian economist named Vilfredo Pareto, and I'm not going to dive crazy deep into the story, but he basically found that 80% of wealth in Italy was owned by 20% of the population. And he just noticed this uneven distribution all throughout Italy and all throughout life. He even noticed that he was— I guarantee he did. He doesn't actually say this, but I guarantee he noticed this, that he was probably wearing 80% or only 20% of his clothes. The 80% of his clothes he didn't even wear. And I think that's relatable for a lot of people. That's just like a very granular kind of life example of the 80/20 rule. But basically what we need to understand in terms of us and growing our business and just living our life as well and working less is that this uneven distribution is scattered throughout life. 80% of our results that we are getting in our life, whether it's in relationships, your health, or in your business as well, comes from only 20% of the efforts that we're putting in. And that's really the power of this, this principle is just being able to identify this, which is what I hope that you'll be able to get from today's lesson. So what are a couple examples of the Pareto principle? Let's dive into this specifically in terms of your business and growing your business. Well, think about this. I have 3 for you. 80% of your profits as a whole come from 20% of your clients. 80% of customer complaints come from 20% of your customers. And then 80% of sales come from only 20% of your products. I'll use one example from me in my own life, in my own business as well. When I first started creating digital products, I was working with people one-on-one. Then I wanted to dive into digital products and start creating passive income. And I've been doing this for quite a while. I've created 6 different courses. And honestly, to create passive income, it took me about 6 different courses. Actually, I've created 7, 7 or 8 courses. I don't know. I've created a lot of different courses. It's been over 6 for sure. But I remember at one point I had 4, 4 or 5 of those courses and I was just like making courses and just like failing forward fast basically. And only one of those courses was actually selling, and it was by far the best course out of all the, all the other ones. And frankly, the other ones really were just kind of like scattered pieces of that first one. So I noticed this and I told people that had access to those courses, I explained it to them like, this is the best course by far. If you just focus on that one course, like that's going to get you the best results instead of having all these other courses just kind of overwhelming. So I got rid of those other courses. And ended up just focusing on that one course and made more money because of it. And I didn't have all these different products that just weren't really necessary. I'd rather focus on the one product and then doubling down on the efforts to sell that one product that I knew was the best product. Okay. And again, that's really what applying the 80/20 rule or the Pareto principle to your business and your life is really about. Okay. I mean, I'm going to go over a couple of different strategies and questions you can ask yourself to really dial down that 20% that does move the needle. But most of it is just being able to identify and then take action on and double down on the things that do work. That's really all it is. Okay. And one thing is like, we talk about the 80% and the 20%. It's not always 80% and 20%. Okay. The idea is that if I focus on this one thing, it's going to move the needle more than any of the other things that I could be doing in my business? Because truthfully, there are so many things that we can do to grow our business. It is kind of ridiculous how many options there are. There's different business models. There are different types of businesses that we can go for. There's a lot of things. And frankly, I mean, the business model or the method that I have learned and that I teach and that I help other clients in growing their business and have used in my own life with the passive income. I also love booking calls and I love coaching people as well. But primarily focusing on passive income so we can have freedom in our life. That is one business model. And there are a lot of different business models. There's people who do like Facebook groups. That's one business model. Okay. And like ads, that is one business model. So really, I mean, you just need to kind of decide like, what do you want your business to be like? For me personally, I like creating content like this and putting it out and then driving leads over to my website and being able to use email copy and sales pages to make sales for me automatically. I think that's awesome because I'm not paying for ads. I'm not, unless I want to, but I don't need to pay for ads. Basically, you get it all organic and I rely on my writing skills and then I can automate the whole process and essentially set it and forget it. Okay. Passive income isn't completely passive, but that's a topic for a different day. But basically I want you to think like, really think about that one business model and that, that aligns with the kind of life and business that you want to have. For you and realize that there is uneven distribution with it. There's a lot of things that you can do in terms of the method that I'm teaching, downloading the 5-step action plan that I shared with you in the beginning. That's really going to help you get clarity. And that's really the point of it. It's highly actionable and you can use that guide as well, but you have to just be able to notice the key things that are actually going to move the needle for your business. Because if you can stick with those few things instead of jumping around all these different things, you're going to have far more success because you were just consistent with the things that worked. So those are some examples of the Pareto principle. Let's dive into actually applying the Pareto principle to your business. Kind of touched on this. We just want to start noticing the 20% and the 80%. Start noticing, and you can even do this in your life. Like, like I talked about with clothes, if you look at the clothes that you have in your drawer, I need to go to the Goodwill. I don't even know how my clothes filled up as much as they did my drawers. It is insane. I'm like, Where'd this all come from? But people get gifts and things and I just kind of put it in there and it filled up. So I have to do a purge, but I only wear like 20% of my actual clothes. I just wash them and recycle them, you know, and just keep wearing them. Um, and that's the 80% of the clothes that I have in my drawers. I don't even wear. This is another topic for a different day because I go through my, my clothes and I'm like, I want to just, uh, like keep some of these outfits, but I don't really wear them. Okay. So that's where we kind of have to decide what we want to do with it. From there. And really in your business, look at those— like I had as that example with my different products, I noticed that one of the products was producing the most amount of income. So I got rid of the rest. I literally deleted them because it was pointless. And that was just a personal decision on my end. So just start by noticing that 20% and the 80% in your business. Start noticing those different clients. What are the problem clients? Like, just because you have clients doesn't mean that they're good clients and it's okay to fire clients. Okay. But notice that some of the clients are just total rockstar clients. You want to keep them around and you want to get testimonials and case studies for those clients and double down on those clients. Because when you do that and they get amazing results, you can use those case studies and testimonials to attract more people that are like those specific clients. So double down on what's working once you start to notice it. Even if you look at your phone, you probably only use 20% of the apps on your phone. 80% of them you most likely don't even use. It comes down to just deciding what you want to do with that. We're going to get into that in just a sec. 80/20 and the Pareto principle is more of an art and an intuition than a science, I would say. But you can see, excuse me, I'm getting over a cold, by the way. You can see through the data what's working and what's not, just like my courses that I had. But really a lot of it is just being able to like sit down and think about it. You can use some of the data to decide, but you have to use your intuition to really think, is this the right thing for me and really helping me actually grow the business right now? If not, then you can do what we're going to talk about in just a moment. One of the best questions that has really helped me and been massive, massive for me comes from Gary Keller's book, The One Thing. And the whole book is focused around this one question. I talk about it a lot on my channel and on this podcast as well. But the question is, what is the one thing I can do that such by doing that will make everything else easier or totally unnecessary? What is the one thing I can do that such by doing it will make everything else easier or unnecessary? For me, I knew that if I just got rid of those courses, didn't even have to worry about them, make my life easier and totally unnecessary because really they just weren't working. They weren't the best courses. I'd rather focus on the one course. Okay, that was just one example. But for you, I want you— I mean, you can pause this right now and just think about this. What's the one thing you can do right now for your business that such by doing that one thing, it would make everything else easier or unnecessary? What's the one thing you could learn? What's the one action you could take? Think about that and let me know down in the comment below. Or if you're on the podcast, you can leave a review and talk about like kind of a takeaway you got from it. But Answer that question for me. That's a little accountability. And what we want to do when you identify that one thing is really focus on it and test it and then regularly check what has worked and what hasn't. You can do this every week or every month. You could even do it every year if you wanted to. I wouldn't say do it every day. It's a little excessive, but this is part of noticing that 20%. And the 80%. It's just looking at what is working. If you look at your content, you could be putting out a lot of different types of content, but if you see that one type of content, one style of content is really working for your channel and your audience, double down on it. Start to focus on that type of content more. Okay. And that requires experimentation. I think as business owners, we should always be experimenting with different things. And then when you find those things that do work, double down on those, but you can still experiment a little bit on the side. Because you can end up finding something better. We'll see. But now you might be wondering, okay, I can ask a focusing question. I'm starting to notice the 20% in my life, checking what has been working, what has not been. What do I actually do with this 80% that is just kind of fluff, really? When you find that 20% and you have this remaining task or close, if you will, but in terms of your business, It's like the task, or it could even be the extra clients or customers that are problem customers for you. Excuse me. You have 3 options. Number 1, you can automate. Number 2, you can delegate. And number 3, you can eliminate. Automate, delegate, and eliminate. Those are your 3 options. Keep things simple. My, my God, keep things simple. Okay. For yourself, it's going to help you and keep your sanity while growing your business. The first thing we want to do is think about eliminating. I know it's number 3, but it's really the first one that we want to do. You want to see, can I eliminate this? If it's clothes, you know, you can eliminate things. Just give it to the Goodwill, throw it away. I'd say give it to the Goodwill, but, or some sort of organization. Recycle your clothes. With your business, I, I mean, with my courses, I thought, could I eliminate it? I did. I thought, could I keep it in my product suite? I did. And I did for a while too. I kept it in my product suite. I used it as value add, tried to sell it as different products, but they just didn't sell. So I came down to a point where I said, I'm just going to eliminate it. So first we want to see if we can eliminate the thing. If you can't eliminate it, you cannot, then we want to see if we can automate the process or automate it in some way using technology. Lastly, you want to delegate. So if it can't be eliminated and you can't really automate the task, that's when we start to delegate and outsource it to someone else, whether that's an employee or someone on like fiverr.com or something like that. Really, that's all it is. 80/20 rule. 80% of your results come from only 20% of your efforts. So start to notice that 80% in your sales, with your customers, in your, just in all the main areas of your business, with your content as well, with your opt-ins, which lead magnets, if you have multiple lead magnets, which one is producing the best results? Double down on that. That's what you want to do. You first want to identify it and then double down on what is really working. Remember, it's an art. It takes intuition. There is a bit of science because you can see from the data of what's actually working or not. But really, it's up to you to discern in terms of your intuition if you should automate, delegate, or eliminate that task. And if you want some extra help in just getting started, that's where you ask the focusing question. What is the one thing I can do that such by doing it will make everything else easier or totally unnecessary? When you identify that, focus on it, practice it, and then go from there. Okay. You could find another way that's as good, if not better than that. Now, if you enjoyed this video today and you want to pick up your 5-step action plan, it is my gift to you. It's literally free. If you want to start creating passive income in your life, you have a vision of selling digital products or just products in general on the internet. You want to build a business that runs for you even if you're not working. Pick up the 5-step action plan. It's going to help you earn that first $100 or more in passive income. It can be $500. It can even be $1,000 or more depending on what you decide to build with the guide. The most important thing is that you understand the process and you apply it. To get the guide again, just go to profityourknowledge.com/guide, or you can click the link in the description. And I'd love to hear from you. Let me know down in the comment below if you did do that exercise of just asking yourself the one thing, that one focusing question, what is the one thing I can do that such by doing it will make everything else easier or unnecessary? And you're on YouTube right now, leave a comment below. Let me know what that one thing is. For you and it's just gonna be helpful for you 'cause it's gonna help you put it out there and really make it be more intentional and just keeping it up in your head. Okay, same thing if you're on the podcast, you could just leave a review. Okay, I don't have comments section on my podcast. But anyway, that is all that I have for you today. Most important thing is that you use the 80/20 rule in your business. You focus on, I hope today gave you some clarity. Hope you have an awesome week. I will see you soon and I guess see you next week. Till then, bye-bye.