Pareto's Principle: The 80/20 Rule

What is the 80/20 Rule? How can you apply it to your business?

Vilfredo Pareto was an Italian economist who said that 80% of consequences come from 20% of the causes and asserts an unequal relationship between inputs and outputs. While it was developed to study land and crop production, it applies to your business too.

 Examples that can be applied in your cleaning business:

1. 80% of your complaints come from 20% of your clients.
2. 80% of your employee challenges come from 20% of your employees.
3. 80% of your search visits came from 20% of your website and social media keywords. 
4. 80% of your profits come from the top 20% of your clients.
5. 80% of your cash flow issues come within 20% of your month.
6. 20% of your staff derive 80% of your company’s profits.
7. 80% of misplaced time in your payroll come from 20% of your employees.
8. 80% of customers' perceived value relates to 20% of an organization's work.
9. 80% of your employees’ absenteeism is caused by 20% of your employees. 

Think of scenarios you’ve faced and I bet you see a correlation between those two numbers. There are patterns.

So, how can we use the 80/20 Rule? There are case uses. These patterns leave clues and you can use the 80/20 Rule as a window to fix things that need to be fixed.

When you want to increase prices, expect 20% of them to cancel on you. This way you can target and plan ahead and have those clients replaced with new business before you send out those cancellations.

Always do individual Profit and Loss statements for each client. Chances are that 20% are a drag on your finances, whether by loss or no profit at all.

When you hire, expect that 20% will not cut it, and have people behind them ready to run in case they don’t work out.

20% of your clients are a drain on your mental time. Consider that window and have new clients on the ready. Always be marketing.

20% of your employees aren’t productive like you need them to be. Keep on top of that and replace as needed.

20% of cleaning companies out there will serve 80% of the market. You need to be one of them!

With the 80/20 Rule, you can be better prepared and on top of your business game.