Pareto Profits

You probably know about the Pareto principle.

It’s the principle discovered by the Italian mathematician (whose last name was, surprisingly enough, Pareto) that states something like the following: 80% of the results in any system arise from 20% of the inputs in that system.

In the world of business, the Pareto principle is commonly invoked when noting such mathematical oddities as the fact that 80% of the sales are generated by less than 20% of the sales people; 80% of the revenue is generated by less than 20% of the customers; 80% of the leads are generated by less than 20% of the phone calls… and so forth.

As an entrepreneur, it is profitable to think about the Pareto principle in the following way: 80% of your results will flow from only 20% of your activities. They should become a liberating truth for you. It constitutes mathematical permission for you to focus only on the 20% of things you like to do anyway. The truth is most entrepreneurs are people who enjoy “visioning”-or, as my private client Frank Kern likes to put it, “scheming”. This doesn’t imply anything evil; it simply recognizes the fact that entrepreneurial types tends to enjoy coming up with the big ideas, seeing the big picture, laying down the strategy, and leaving the cleanup and details to others on their team. In the world of the Internet, there is an ethos that if you can do it yourself you should do it yourself. This has had the result of locking up entrepreneurs in a prison of detail work.

No entrepreneur should be installing WordPress blogs, debugging scripts, or figuring out how to make the latest plug-in work… unless this is out of financial necessity. And assuming that you’re any kind of entrepreneur at all, the period of financial necessity may exist from time to time, but should be short-lived.

The prosperous practice of the Pareto principle simply means: only do the stuff you’re best at, the stuff that gets results, that puts sales on the books, new clients on the roster, and “moves the needle”. Anything else is a waste of time.

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2 thoughts on “Pareto Profits

  1. Right on Ray. Scheming is fun – but deploying the scheme is what my judge friend down in Texas calls “chopping wood.” You’ve got to simply stand there and chop, chop, chop until it’s all done and there’s no other way around it.

    You’ve made a bold decision to blend your Christian heart with your marketing copyrighting wisdom. Good on ya.

    • Thanks Rick – it was really less of a decision to “blend” and more a decision to be the fullest expression of who I am. It might have looked different if I wasn’t in a “personality” business. For instance, if I ran an auto repair shop. Then again, mayhap not…