80/20 Rule

Author: Nicky Senyard

CEO and Founder of Fintel Connect

Creating Leverage with the 80/20 Rule

by Nicky Senyard | Sep 29, 2020 | Merchant

How often do we as business owners and entrepreneurs state the following:

“The problem is I don’t have enough time/resources/money/ to get the results I need.”

The interesting thing about business – and even life – especially when you are building your own business, is that there never seems to be enough – usually time and money.

The entrepreneurial mantle means that there is always more to do, and often times with less.  The key to your business growth is to find the path, process, and systems that allow you to achieve your results with what you have at your disposal.

Take advantage of leverage and use an investigative approach to exceed your objectives. Leverage in operating a business means harnessing the power of the 80/20 Rule or Pareto Principle. For those unfamiliar with this principle, it states that for many events, roughly 80% of the effects come from 20% of the causes. 

80/20 Rule

So how can you use this framework in a practical way to help you achieve more with less? I’ve detailed my thoughts here on the tactics I use as an entrepreneur to really help my business get it done.

Working out the Major and Minor Levers

As with most strategies, clearly defining your goal or outcome is the vital first step.  This step needs no explanation.  What usually happens once the goal has been defined is action.  Activities started, tasks logged and deliverables achieved.  This is not the leverageable approach.  This is the wasting resources approach.

The leverageable approach means that after you have defined your goal you need to detail the following information:

  • Know what needs to be done
  • Know how it needs to be done
  • Know the sequence in which it needs to be done
  • Know the resources you need in order to carry out what needs to be done
  • Create a formula to achieve the results
  • Implement/action based on the formula
  • Observe, monitor, record
  • Refine and polish

To achieve any goal there is always major levers and minor levers.  The major lever is taking 20% of your effort and producing 80% of the results.  The minor levers will require 80% effort and only contribute 20% of the results.

Your job in growing your business is to work out what the major levers are and what the minor levers are.  You cannot do this without doing the first seven steps above.

Finding the Right Formula

Without the ingredients and the recipe, you’ll never be able to effectively and efficiently be able to produce the same high quality “chocolate cake” every time.

There is a formula for leverage for any given task or goal – most people can’t see it because they don’t look!

One of the best ways to see the formula is to have a clear understanding of what hasn’t worked.  History is amazing for vision of hindsight.  As the saying goes hindsight gives everyone 20:20 vision.

With most things there is a long way to achieve your outcome (80% effort for 20% return) or a short cut (20% effort for 80% return).  To find the short cut you need to be able to eliminate the steps that contribute very little.  To have this insight you need to be able to understand each step, its contribution and role in the final outcome.

Walking Through an Example

So how can you collect the insights you need to find the major levers and remove the minor levers?

Let’s go through an example:

SituationGrowth Strategy – Cold Calling – Current results 90% failure rate

What needs to be done? Find potential clients and call them to see if they have any interest in the product you are selling.

What is the best process to do these activities? Considerations:

  • Ideal organization
  • Decision-making position
  • Time to call
  • Most pressing problem your product solves

What’s the best sequence to do these activities in? Research, script development, test implementation, roll out and then evaluate

Who is the best person/resource to do these activities? Considerations:

  • Senior or junior
  • Experienced or inexperienced
  • Salesperson or operational person

Delivering a hypothesis

Now that we have identified all the variables, we need to deliver a hypothesis or formula.

In my experience, most people start with the goal, have a general idea of what needs to be done and then simply start.  Of course, there is no inherent problem with this approach.  The only thing that it lacks is a systematic way to adjust. 

Initiating something new or doing something for the first time always has its issues.  The way to get to success fast is to know what variables you must move to get the leverage you need to do more with less.

Finding the leverageable components

In the example we are working through, 90% failure means that something is not working.  If you have not identified the leverageable components, then there is no way to get to the 80/20 rule.

Leverageable components:

  • Target list
  • Time of call
  • Person’s skill set doing the call
  • Call approach – script/strategy
  • Any others you can think of?

Measuring impact

Next, let’s allocate a percentage based on impact to success (leverage):

  • Target list 50%
  • Time of call 10%
  • Person’s skill set doing the call 10%
  • Call approach – script/strategy 30%

The percentage allocations clearly show that the most important component of this process is the target list.  Do this task well and the success rate of the activity goes up exponentially – this is where you have leverage and can apply to 80/20 rule.

The formula for cold calling must be based on the most effort and energy going into a) the target list of who to call and then b) int the strategy or script on what is said.  If these two things are measured and monitored, then the speed to success is increased and the rate of success is also increased.

Key Takeaway

There will always be the drive to do more, achieve more and accomplish more. The key is how to do more, achieve more and accomplish more with less – less effort, less time, less resources and less stress.  Until you break down the individual components of your activities, you may never be able to find the leverageable pieces that allow you to apply the 80/20 rule and find the efficiency that leads to success!

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