The 80/20 Rule


“Mark Whitmore here, head coach at Lodestone True North.

I want to talk to you for a minute about how to stimulate growth in your business.

First of all, let’s go over a couple things by what we mean by growth, or what sorts of things should, could, or ought to grow.

Of courses there’s profit, top line revenue or margin market share. Then you have some of the softer things like your time, credibility, or impact on the market. You might have a growth in the strength of your folks, a growth in your talent pool or the depth of your talent pool. That’s a couple of ways that are really easy to talk about or common areas where folks need to, or want to grow, in their business. The best way to impact growth really is to figure out the truth of the fact that your inputs and outputs do not match up and won’t match up. There is a disparity in nature, in existence, between inputs and outputs and that disparity and principle is talked about 80/20 Principle.

This book by Richard Koch is a great book on the Pareto Principle which is a law that shows that inputs and outputs have disparity between them. This principle means 80% of your profit is probably coming from 20% of your client…or 80% of your revenues coming from 20% of your products…or 80% of your problems are coming from 20% of your products…and 20% of your employees are causing 80% of your problems. There is all kinds of disparity in there.

The trick is that you want to look at your business and identify where those kinds of micro inputs are creating macro outputs. It takes a little bit of objectivity. You have to take some time and pull away from your business a little bit to see that. But, once you see it, then you want to dump a little more time and energy into those smaller inputs that create the bigger output.

You might have your best ideas at certain times that have created real good opportunities for you. Those times where you figured out how to hire the best people, you should spend more time doing that because 80% of your results are coming from 20% of your people. You could shrink down your organization to more of those 20%ers and you’re going to have a big impact if you add a few of those but take away 80% of the other. It’s just a couple of ideas.

One take away for you is first of, read this book The 80/20 Principle by Richard Koch, then look at your time, energy, inputs, and identify which inputs are producing great outputs and dump some gas on those and then cull some of the inputs that are not bringing you return. That’s the best way to stimulate growth in your business.

Mark Whitmore, Head coach, Lodestone True North.”

Mark Whitmore is the leader and founder of Lodestone, a dynamic firm of experienced, business consultants who help entrepreneurs and managers get what they want from their business.

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