When I first read about the 80/20 rule, or the Pareto Principle, I had a healthy skepticism for it. I couldn’t wrap my head around how 80 percent of my work would only lead to 20 percent of results and that the remaining 20 percent of my efforts would lead to 80 percent of my profits. Over time, however, I started to see some patterns that would prove the 80/20 rule to be completely true. Once I took steps to implement what I learned from it, I doubled my income in about two months! Read on to learn how it happened and how you can apply the 80/20 rule to your business.
Does the 80/20 rule apply to your business?
When I still had my old day job, I took some time to assess my projects and found that the 80/20 rule held true to some extent. There were some projects I was incredibly efficient at completing and always impressed my boss. Others took up a ton of time and led to huge frustration for little reward. By focusing on the projects that led to the best results, I was able to improve my efficiency and landed a promotion with a fat raise.
But with a boss who dictated my to do list, I had limited ability to implement 80/20. When I left my day job and went full-time in April 2016, I hustled and took every dollar I could get. But that strategy left me feeling burned out and tired while struggling for the profitability I wanted. It was around then that I realized it was time to look at my business with an 80/20 lens.
The 80/20 rule was nearly spot on for my business
From June through September, I earned $5,000-$8,000 per month in revenue. Good income, but not great. And living in expensive Southern California and paying for expensive rent and insurance on my own, a $60,000 annual revenue rate would leave us struggling to get by. I was working long hours but no matter how hard I hustled, my income wasn’t making any big jumps.
I started talking through my revenue, business strategy and where I was spending my time with my wife and members of my mastermind when I realized that my website development business was earning far less with more hours than the writing side of my business. That’s when the 80/20 came back to mind.
I quickly glanced at my accounting reports and saw that I was earning a little over 85 percent of my income from writing but was spending about 75 percent of my time on website work, which was bringing in around 10-15 percent of my revenue. Holy 80/20 Batman!
After talking it through with my mastermind, I decided it was time to shut down my website support business in favor of focusing on writing. I slowly started turning away hourly work, then bigger website projects, then monthly recurring clients. I still have a few long-term clients in my web business, but for practical purposes it is shut down.
At its peak, I was earning around $2,000 per month from website support and development. Not chump change, but also not enough to bring in the big income I wanted and support my family in SoCal. Shutting down freed up so much time that I was able to focus on bringing on new writing clients and could stop wasting time on sometimes frustrating website projects.
Watching my income skyrocket
At the same time I shut down my website business, I was bringing on new clients that I met at the FinCon conference. All of the free time helped me destress and focus on those new clients, and the results started to appear in my monthly income statements.
In August I brought in $6,900. In September I made $7,300. In October I made $14,800. In November I broke through $16,000! I doubled my income in two months! Now I work less, enjoy what I do more and had a couple of months where I earned over double what I was paid at my old day job.
It turns out that economist Vilfredo Pareto knew what he was talking about. 80/20 completely revolutionized how I look at my business. I’m earning more and I’m happier than ever. Since adopting 80/20, I have not had a month below $10,000 in income.
Applying 80/20 to your business
Can your business benefit from 80/20? Odds are that it absolutely will. You may not see such dramatic results, but you can always improve by looking at what’s working and what isn’t working in your business. If something works well, repeat. If something doesn’t, stop doing it. In life and business, that is the best strategy to follow.
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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.