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80/20 Law

In 1906 Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth across Italy. He noted that 20% of the people owned 80% of the wealth.


I'm sure this will be familiar to many people reading this post (but for those who are not) this has since become known as the Pareto Principle and can be applied to many aspects of business and sales.


Here I've picked out a few interesting stats to demonstrate this fascinating law in context:


- 80% of your sales come from 20% of your customers

- 20% of input (time/resources) creates 80% of the outcome

- 20% of salespeople make up 80% of a company’s revenue

- 80% of complaints come from 20% of customers


So how can we use the 80/20 rule to help in our business & sales?


Firstly, if you can identify which customers fall into the 20% bracket making up 80% of your sales, you can prioritise and nurture these accounts for long-term working relationships.


You could also map out the characteristics of the top 20%, and find similar clients who share those commonalities to significantly increase your revenue.


Second, take the time to understand where most of your results come from – i.e. where your time and effort is best spent!


Third, as a sales leader identify who is in your top 20% along with any commonalities in terms of their skills, tools, mindset and strategies. This knowledge can then be used across the team to help bring others up, or by coaching in areas of potential improvement.


Lastly, determine which 20% of your clients are leading to 80% of problems. Minimise these.


Have a play around with this principle and you'll see it applies to so many aspects of our lives.


For example you probably use 20% of the apps on your phone 80% of the time.


You most likely wear 80% of your clothes 20% of the time.


80% of the returns on your stock portfolio will come from 20% of your investments...the list goes on!


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