The Pareto Principle

Another fascinating video from Kevin the Window Cleaning Business Coach:

"Have you heard of the 80/20 rule before? It is sometimes referred to as the “Pareto Principle”, and maintains (among other things) that 80% of revenue generated by your business - and any business - comes from only 20% of your clients.Take a moment to ask yourself if that is true of your business. Is it? Of the last $25,000 you’ve earned, has 80% of it come from your 20% most important clients? Probably so. Maybe in your case, its more like 85/15 or 75/25, but the principle basically holds true."
"Now, here’s the kicker, and the beauty of embracing and accepting this: You can make a lot more profitable use of your time in the next 3 and 6 months by focusing more attention and importance on your communication with this precious 20%. How so? Well, one way is to spend a bit more time and effort on giving them more interesting and compelling offers and communication, making their lives a little more fun, and helping them enjoy doing business with you a bit more than your average client."

Italian economist Vilfredo Federico Damaso Pareto observed in 1906 that 80 percent of the land in Italy was owned by 20 percent of the population. Later, he observed this noteworthy ratio seemed to apply to other parts of life, such as gardening: 80 percent of his peas were produced by 20 percent of the peapods. Over time, this concept has come to be known as the "Pareto Principle," "The 80/20 Rule," and even "The Vital Few and Trivial Many Rule." Interestingly, another of Pareto's most noteworthy and controversial theories is that human beings are not, for the most part, motivated by logic and reason but rather by sentiment.
Observing the Pareto Principle in Action
Here are some 80/20 rule applications:
Does 20 percent of your sales force produce 80 percent of revenues?
Do 20 percent of your products account for 80 percent of product sales?
Do 80 percent of your visitors see only 20 percent of your Web site pages?
Do 80 percent of delays arise from 20 percent of the possible causes of delay?
Do 80 percent of customer complaints arise from 20 percent of your products or services?
We all waste lots of time on trivial, repetitive tasks. That often means people are kept busy whether it is important or not, equipment is running whether needed or not, sales are made whether they are profitable or not.
Is the assertion that a small number of events produce the majority of results valid? It may not be a hard rule with a fixed ratio, but the observation has merit:
A handful of customers out of many produces the bulk of revenues.
A handful of products out of many items in a line produces the bulk of orders.
A handful of salespeople out of many produces the majority of new business.
A handful of scientists produces most research and development innovations.
Most grievances come from a few employees, and most absenteeism can be narrowed down to specific individuals.
Most accidents occur in clearly identifiable groups.
Truly poor (or great) performance is achieved by a few easily identifiable individuals.
We tend to ignore these realities in practice.