Revisiting The 80/20 Rule and Why It Is Even More Critical To Your Business In 2009
The year 2008 for me was dominated by a long trip overseas, which meant I was away from home and in a constantly changing environment.
Although I boast I was able to run my business while traveling a circle around the globe, I’d be lying if I said I didn’t experience more pressure on the time available for work.
The way I chose to travel resulted in planning the details for my next stop a week before I arrived - sometimes just 24 hours before arriving or even after arriving! This included booking accommodation, flights and figuring out things like how to get from the airport to the apartment or hotel I was staying at.
Once landing in a city and settling in, the next “pressure” was determining what was worth seeing and doing, and ensuring the time available for fun was used on the best sites and attractions. This involves research and planning, reading reviews online at sites like TripAdvisor.com, buying tickets for tours and figuring out how to get to places using public transport.
When at home in Brisbane my time is quite fluid and I have few commitments or deadlines. With just my mother now living in Brisbane, I rarely have family events on and I’m not married with children, so I’m pretty much looking after myself.
Traveling dramatically changed how I live. What is normally stable in my life - where I live, what I do during the day and what I eat - became dynamic, with the variables changing every week. Suddenly my free time was gone and I was forced to live in perpetual inconsistency.
As a result of the constant changes in my life, I had to become very focused with how I used my working time. I didn’t want my blog to die, I had customers to support and I wanted to work on new projects so my business continued in a positive direction. This was no easy task, but I’m proud to say that I was able to achieve all my business goals in 2008 despite the changes to how and where I lived my life.
Revisiting the 80/20 Rule
If you’ve never read my article on the 80/20 rule, go do so now. It’s one of the most powerful concepts available today that can truly make a difference to your life and your business. My article introducing you to the rule has been one of the top 10 posts on this blog for years. You can find it here -
If I look at the metrics, this was a great year for my business. I more than doubled my revenues, my blog readership and email lists grew significantly, I had successful product launches and released some fantastic free resources like the Conversion Blogging video, not to mention publishing many articles on this blog that I know will continue to bring in traffic for years to come (the true essence of a pillar article).
None of this would have happened if it weren’t for the 80/20 rule.
Information overload has always been a problem. In 2008 it became even more of a problem. Although a great enabler and empowering tool for education, the world wide web has created a situation where it’s as important to be aware of what you need to know and do as much as knowing how to do it. If you don’t learn how to ignore 99% of what’s out there, you never get the clarity to learn the 1% that you should focus on.
I Want Your Attention
Are You Reading Too Many Blogs About Blogging?
Here’s another message I sent out to my eager Blog Mastermind students-in-waiting, this time on the subject of consuming too much information and not actually doing anything with it.
If you want to get these messages (and I’ve sent out over 20 already) you need to be on the Blog Mastermind early notification email list.
******
There’s something that really frustrates me. You want to know what it is?
It’s you.
Well, not you exactly. What I mean is the majority of people who have ever purchased an educational product online.
I wasn’t going to launch a blog mentoring program for one very good reason - there is so much free information already online about how to make money blogging, how to drive traffic to blogs and just general blogging tips, I thought what’s the point?
Who will join my program when there is so much free content out there already?
Then I realized something.
If there’s so much free information out there already, why aren’t more people enjoying success with their blogs? Why aren’t there more professional bloggers? Why isn’t it NORMAL for people to earn a full time income from blogging?
It comes down to two issues:
Why I Have To Keep It Simple In Melbourne
Melbourne Minutes & More 80/20 Moments
I’ve snuck down to Melbourne for four days. This trip is for business and pleasure, starting with the two days of work I’ve just finished.
I’ve been training someone who will be marketing BetterEdit.com at three of the largest Melbourne university campuses using posters. This is the first year I’ve attempted to hire people to do this for me and in the past I’ve done it myself, mostly in Brisbane since its within my reach. I’m starting by hiring someone to do it in Brisbane for me and to test whether it can be profitable to have people do it in other cities starting with Melbourne.
If Melbourne works out well the next step will be to replicate in Sydney and possibly Toronto since I will be heading to Canada later this year. I expect the people I hire to do this job won’t likely be able to do it for much longer than a year (if they average a year I’ll be pretty happy) so I’m hoping to implement a system where the outgoing person trains the new incoming person so I don’t have to tramp around Australia and Canada training people.
You may wonder why I need to train people how to put up posters since it’s not exactly rocket science. It’s not as simple as you may think. It’s important to show people how many posters to use per board, where to place them on the boards, when to use small and/or large posters and lots of other little tips and strategies. I’d like to meet every person if I could so I can assess their personality and get to know them but as I said it’s not going to be cost effective to trek all around the planet each time I hire a new person.
I have no idea whether this system will be sustainable or even profitable but you never know until you try. It largely comes down to the people. If I find responsible and trustworthy people it should work out well.
A One Minded Focus - Another 80/20 Rule Example
My focus really hasn’t been on BetterEdit recently. I’ve been pouring all my energy into Blog Traffic King and getting the Blog Traffic School course finished. Spending some time in Melbourne promoting BetterEdit has switched my brain back on to student focused marketing for a couple of days.
Melbourne is bigger than Brisbane. Melbourne has more of everything and I’m constantly reminded of all the opportunities in a city like this. Walking streets from the CBD to Melbourne University presented me with so many opportunities (or at least potential ideas) to reach more international students (my target market). Melbourne has probably close to double the amount of campuses as Brisbane, is littered with student accommodation buildings and places where international students hang out.
In some ways it’s extremely frustrating. The limitations of being a one man show with a mini budget means I can really only spend time and energy on a handful of marketing activities. It just doesn’t work to spread yourself thin and attempt to leverage every opportunity that is presented to you. In fact even if I had a marketing team working for me I could only hope to brush the surface of the all the marketing methods I could test. There’s just too many.
Once again the 80/20 Rule applies nicely in this situation and I reminded myself of this while promoting in Melbourne. While realistically there are no doubt hundreds, even thousands of opportunities to market in Melbourne it’s much smarter if I spend most of my time on a small handful of locations using what works - my posters. If I can locate the 20% of locations in Melbourne where 80% of the international students spend 80% of their time I have the key to gaining massive exposure at minimum cost. Heck I really only need to hit the top 1% of places where 99% of students are and I’ll get tremendous results.
Spoilt For Choice
There was a documentary recently on TV that I caught a bit of during the day that discussed the issue of too much choice. The thesis argued that people are depressed because they have too many options to choose from (when it comes to consuming of course - food, clothes, electrical goods, cars, and so on).
The problem is when presented with so many options when we finally make a decision we end up unhappy because of all the other options we forgo. The net loss from so many forgone options is greater than the satisfaction gained from the choice we make.
This made complete sense to me. I’ve suffered from indecision-itis myself. Being in Melbourne always tends to bring on a recurrence of the problem. I often wish I was hungrier in Melbourne. Why can’t I have two lunches and three desserts? There is so much food I want to sample yet I’m not hungry beyond what you would expect - three meals a day and a bunch of snacks in between.
I remember when I was younger being paralysed by indecision to the point where I just could not feel satisfaction unless I spent a stupid amount of time carefully assessing my options. From this experience I realized that once again I needed to 80/20 my decision making process and focus on making things simple. As a result I consistently eat the same handful of meals (the 20%) despite all the other options available to me (the remaining 80%). By doing this I can make choices quickly and enjoy my choice without worrying about what I have missed out on.
Simple Business
As I’ve focused my mind on Blog Traffic I’ve been able to simplify my routines. My working life is focused on starting a new business and maintaining the current businesses. While I’m constantly thrown new opportunities I can easily decline or ignore them strong in the knowledge that I have to keep the ship on one path or risk it breaking apart.
This simplification process results in me working more productively and keeps my mind very calm. I’m not over stimulated by all the things I “could do” that I am not, both within my businesses and without from potential new business ideas.
Of course you can’t enjoy this sort of clarity until you solidify your choice regarding what your business or job is. However simplification is certainly a mantra you can repeat to yourself no matter where you are or what you are doing. In a world with too many options it’s important to remember you only NEED basic things - it’s your WANTS that create the dissatisfaction. Focus on necessity, focus on the 20% that brings in the 80% of results and everything will work out fine.
Yaro Starak
Simplify maaaaan…
What Is The 80/20 Rule And Why It Will Change Your Life
I mention the 80/20 rule frequently in my writings so I thought it was about time to write a proper introduction to the concept. I believe it’s fundamental to every business person - to every human being - so if you have never heard of this rule, please read on and absorb everything I’m about to tell you, it could potentially change your life.
The 80/20 rule sounds like a statistic and in some ways it is. Personally I’m not a big fan of maths and beyond basic web statistics like pageviews, impressions, unique visitors - and when I stretch myself - conversion rates and split testing, I try and avoid all complex numbers. I work better with feelings, ideas and concepts.
The good thing about the 80/20 rule is that you don’t have to understand statistics to be a believer. Yes it has foundations in economics and yes, it was “proven” using statistical analysis by a man named Pareto, but it is not meant to be understood only by economics professors.
Here’s what the Wikipedia has to say about it:
The principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of income in Italy was received by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes.
I can’t remember exactly when I was first exposed to the 80/20 Rule but I know when it first really hit home. I was in my local bookshop and I picked up a copy of Living The 80/20 Way by Richard Koch. Koch took the 80/20 Rule and made it his own by writing a series of books on the topic. Living The 80/20 Way fit me well because it discussed living life productively seeking maximum satisfaction by focusing on your passions (Koch has written other books focusing on the 80/20 Rule for business and managers that I didn’t enjoy quite as much). At the time I sometimes accused myself of being lazy for not “working hard” but I realized what I was doing was living an 80/20 lifestyle and in fact probably being a lot more productive than those working harder than myself.
What Exactly Is The 80/20 Rule?
By the numbers it means that 80 percent of your outcomes come from 20 percent of your inputs. As Pareto demonstrated with his research this “rule” holds true, in a very rough sense, to an 80/20 ratio, however in many cases the ratio can be a lot higher - 99/1 may be closer to reality.
It really doesn’t matter what numbers you apply, the important thing to understand is that in your life there are certain activities you do (your 20 percent) that account for the majority (your 80 percent) of your happiness and outputs.
You may have expected me to say that 20 percent of your activities produce 80 percent of your financial rewards, and that is true, there are probably a handful of activities you do each week that produce your income. You can definitely apply the 80/20 Rule to most aspects of your business or working life, however I believe your overall happiness and satisfaction are much better variables to focus on. Money certainly plays an important role in your happiness and your money is influenced by 80/20 relationships, but it is only a component that leads to your overall well being, which should be your primary concern.
80/20 Examples
There are many economic conditions, for example the distribution of wealth and resources on planet earth, where a small percentage of the population controls the biggest chunk, which clearly demonstrate the 80/20 Rule. There are business examples such as 20 percent of employees are responsible for 80 percent of a company’s output or 20 percent of customers are responsible for 80 percent of the revenues (or usually even more disparate ratios). These are not hard rules, not every company will be like this and the ratio won’t be exactly 80/20, but chances are if you look at many key metrics in a business there is definitely a minority creating a majority.
At a micro level just by looking at your daily habits you can find plenty of examples where the 80/20 Rule applies. You probably make most of your phone calls to a very small amount of the people you have numbers for. You likely spend a large chunk of your money on few things (perhaps rent, mortgage payments or food). There is a good chance that you spend most of your time with only a few people from the entire pool of people you know.
I’ll present to you how the 80/20 Rule applies to my life and how I have used the concept, although not always deliberately - it’s just the way I construct my life (for maximum pleasure!) -to improve the efficiency of my output and enhance my overall lifestyle.
My 80/20 Life
In my life I’ve noticed plenty of 80/20 ratios and generally they relate to my core competencies and passions. I really enjoy writing articles such as this, recording podcasts and interacting with other business people through Skype and blogging. In terms of rewards, the two-to-four hours or so per day that I spend writing - when I’m in the creative zone and my best work comes out almost effortlessly - is my money time. My articles and podcasts work hardest to generate income for me, create business opportunities and allow me to express myself creatively. I get the most financial and intrinsic satisfaction from this time.
I expect you could tell me a similar story about your life. During times you really enjoy yourself your output is at its peak. Your passion activities probably don’t pay your bills at the moment, which unfortunately means that you can’t sustain your life by indulging only in what you enjoy. I’ll talk more about transforming your life to a financially stable and personally fulfilling 80/20 format later in this article.
During some times in my life I struggle and waste time performing activities I don’t enjoy or I am not good at. For example bookkeeping is not high on my fun list. I don’t always like managing keywords in Google AdWords campaigns because I don’t have the patience to thoroughly test the variables and track the numbers. The same can be said for things like Google Analytics. These activities are more numerical in basis, I’m not a numbers person so when possible I leave these tasks, along with other activities like programming, graphic design and proofreading to other people, the specialists who enjoy them.
Some of my time is spent procrastinating or working inefficiently doing activities that provide very little benefit. This often occurs when I am tired or below peak physical condition. I sometimes lack the mental throughput to motivate myself to be productive (and boy, my writing stinks when I’m tired!), but I’m working on it and getting much better at reducing time wastage. When I’m in this state it’s smarter for me to study - read books and ebooks - because I’m not capable of producing quality output, but taking input - learning - is a good use of time when I am not there 100 percent mentally.
80/20 Business
When I look at one of my businesses, BetterEdit.com, it’s very clear that a small handful of repeat customers account for most of the income. The customers who become longterm users, who gain the most from the services and fit well demographically and socially with the business model, are key. They provide 80 percent of the value but only represent 20 percent (or much less) of the overall people that use the business. My job is to determine the best way to attract and convert more customers into longterm users.
With blogging I learnt (and teach in my Blog Traffic Tips newsletter) that there are a handful of activities that I do every day that produce the most results. Breaking things down further, there are usually a key 20 percent of elements within an individual blog article (think article headline) that have the most dramatic affect on results. The numbers of course are not clean 80/20 ratios but there are definitely dominant factors at play.
In a business sense, finding the 80/20 ratios is crucial for maximizing performance. Find the products or services that generate the most income (the 20 percent) and drop the rest (the 80 percent) that only provide marginal benefits. Spend your time working on the parts of the business that you can improve significantly with your core skills and leave the tasks that are outside your best 20 percent to other people. Work hardest on elements that work hardest for you. Reward the best employees well, cull the worst. Drop the bad clients and focus on upselling and improving service to the best clients.
How You Can Live An 80/20 Lifestyle
When you start to analyze and breakdown your life into elements it’s very easy to see 80/20 ratios all over the place. The trick, once your key happiness determinants have been identified, is to make everything work in harmony and avoid wasting time on those 80 percent activities that produce little satisfaction for you.
The message is simple enough - focus on activities that produce the best outcomes for you. This applies to both your business/working life and your “other” life (I think they are all part of your “life” but people often prefer to distinguish them). The problem for most people is how to make a living from what you really enjoy, so lets focus on that…
I’m sure you have heard the phrase “struggling artist”. The stereotype where a creative person, musicians, actors, writers and artists, struggle to get discovered and work long hours on horrible day jobs, often in retail and hospitality, until hopefully they finally break out, get discovered and become famous. It shouldn’t surprise you that the ratio of struggling artists who actually become famous enough to live off their craft also follows an 80/20 Rule - only a small few of the overall total manage to get that far.
The same can be said for entrepreneurs. How many of you now reading this article are working day jobs, jobs you probably don’t like much, while you work hard after-hours to get your dream business up and running?
In truth, and this is a sad fact, most people in the world work jobs they don’t like and only truly live their passions on weekends and outside of working hours. Only a small sample actually live their passions day in and day out, how they want to and when they want to. If you want to become one of the special few so you can live your passions on your terms there are a few things you can do.
Focus On Your Passions, Not Material Possessions
The simple fact is not everyone can be a famous artist. Not everyone will start a million dollar business. I’m not going to tell you stop striving for those goals, I’m working on them myself, however you can work smarter TODAY to find greater fulfillment, and that is what living an 80/20 lifestyle is all about. Best of all, your likelihood of becoming one of the famous artists or entrepreneurs is enhanced if you tweak your life to follow the 80/20 Rule because you tap into what you do best more often.
The first thing you must decide, and this is often the hardest step, is to determine what it is exactly you have passion for. Some people can answer this question easily - “I want to be a famous pianists/singer/poet/author”, “I’d like to run my own real estate agency/coffee shop/advertising company” etc. Others may have a general idea “I don’t want a day job” or “I want to run a business” but the specifics are not sorted yet. If you are not sure what your passions are all I can suggest is test yourself. It’s usually easy to determine what you DON’T like so keep doing that until you find what it is you DO like.
Outputs Vs Inputs
I’d like to make a point about outputs vs inputs before moving on. Most humans are good consumers - we are good at taking inputs. Chances are you can easily rattle off a bunch of things you do enjoy about your life: eating out at nice restaurants, consuming junk food, reading books and magazines, going to parties and dance clubs, watching movies and DVDs, listening to music, meeting new people, surfing the net, having sex, playing sports and shopping. All of these activities more or less are inputs which means you consume the outputs of other people.
You may consider the activities I just mentioned passions but it’s hard to find a sustainable passion if all you do is consume. To foster an 80/20 lifestyle you need to locate activities that are passions for you because you create output for others to enjoy. Yes you can get paid to have sex, watch movies, eat at restaurants and read books, but chances are you won’t find it fulfilling or sustainable for very long OR you will be required to provide something back as part of your involvement - that’s your output, the value you create.
It’s okay to love eating out at restaurants and claiming your passion is food, if your intention is to also create output by starting your own restaurant, or a restaurant reviews website or a newsletter or magazine or becoming a chef. If you enjoy listening to music you might also enjoy producing your own music or covering the music industry as a journalist on your own blog.
Only by producing output for other people to enjoy or make practical use of can you expect to convert a passion into a sustainable income. You should understand this already as I suspect the times in your life that you have created something for others or worked on something that benefited other people you experienced the most fulfillment. If you suffer from a lack of direction now, if you are depressed because you don’t even know what your passions are to start applying the 80/20 Rule to, you need to do one thing - start being creative and giving back - produce output! You won’t find fulfillment only by consuming.
An 80/20 Lifestyle Blueprint
To start living 80/20 today you have only to do one thing - focus your energies on what you enjoy.
Part time work - Part time passion
Many people work a full time job and work after hours on a business or hobby or creative talent. If this is you I suspect your ratio is not 80/20 and probably closer to 20/80. You spend way too much time at a job you don’t like, you are probably not very motivated to do it well so you don’t fall into the vital 80/20 employees for that company, and by the time you get home you are too exhausted to spend time on your passion. You feel like you are getting nowhere fast. This lifestyle is not good for anyone since all the relationships fall into the 80 percent that produce 20 percent of the value. You get very little from it and the people you work for get very little from you.
If this currently describes your situation what you need to do is start changing those ratios. Reduce the amount of time you spend at a job you don’t like and increase the amount of time you spend on your passion. You may say you can’t do that because you need the money but I suspect you don’t really need as much as you think you do. Most people can live off part time work but choose to work more because they want more things. You may see your peers enjoying material goods which creates desires in you. Your wants start to outweigh your needs, which is probably the biggest pitfall in our modern, advertising driven, materialistic society.
I’m not saying you have to live like a pauper but I know that your real happiness comes from spending time doing things you enjoy the most, not from earning more money. Chasing the dollar for the sake of the dollar does not work. Chasing passion often leads to a greater income because the quality of your output is so much higher. Focus your energy on increasing investment in your core strengths and you will reap rewards.
Drop your working hours to three days per week and spend more time attracting more clients, booking more singing gigs, finding more time to write your novel or to develop your invention or code your software or find investors or whatever it is you really want to do.
For those of you who have no intention of turning your passions into money generating enterprises this is still a good option. If money isn’t your primary concern but your music is, why do you spend so much time working to earn more money than you need? Yes you need to plan for the future and build assets, but clearly for your musical soul it’s not something that needs to take the majority of your time and energy. You can be happy without that mansion by the sea and you never know, if you spent more time on your music the eventual album sales may one day lead to that mansion by the sea. If not, at least you will be a lot happier for following your enthusiasm rather than the dollar.
If financial freedom is important to you and a big part of your plans look at this step as phase one and work to convert your passions into income generating propositions. Grow your business client-by-client, gig-by-gig or sale-by-sale. keep adjusting your work vs passion time ratio as your business grows to support you and you no longer need your job income. Look for 80/20 activities in everything you do and drop any inefficiencies as soon as you can.
Don’t Let Fear Stop You
The biggest factor that stops most people from chasing their dreams and working towards their real goals is fear. Fear of the lack of security, the reduced paycheck and of the unknown future keeps people locked into routines that are not satisfying. That path leads to sadness, depression, poor health, low income and ultimately an early death. Who wants that!
Don’t let fear be the reason for not achieving your goals. Stop, reassess your real passions, remove the money equation long enough so you can think without worrying about finances, and make plans to move towards your 80/20 lifestyle activities. Maximize what you are good at. Find the activities that produce the most results for you and your business and put your energy where the big rewards are.
Yaro Starak
80/20 Optimizer
