What startups can learn from Pareto’s 80:20 rule

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Published: April 5, 2018 4:08:47 PM

Pareto principle tells us that 80 percent of our results come from only 20 percent of our efforts. If the greatest efforts comes from a little investment, then shouldn’t we stop wasting efforts, and rather invest our time in the ways leading to the most sizable returns?

What startups can learn from Pareto’s 80:20 rule

The 80/20 rule guides our life and actions. The famous Pareto principle tells us that 80 percent of our results come from only 20 percent of our efforts. The 80/20 rule supersedes the traditional ‘more work’ mindset. If the greatest efforts comes from a little investment, then shouldn’t we stop wasting efforts, and rather invest our time in the ways leading to the most sizable returns?

The concept is pretty simple. Devoting yourself to the things that’ll bring in the most is obvious but not understood. How can a startup, without a quantifiable data, move according to the principle? How can startup founders concentrate and execute plans to realise a 80 percent return?

How can entrepreneurs practice the 80/20 rule

80 percent results – 20 percent effort

Startup founders waste their time on what we call – the $50 work. For instance running to stationery shops to get office supplies, while forgetting to focus on activities that could earn them $5000 from sending the right email, making the right call, dialing the right number, making the sales pitch perfect, etc.

80 percent revenue – 20 percent of customers

Entrepreneurs need to understand the efficiency of the 80/20 rule, 20 percent of your customers get you 80 percent of the revenue. Entrepreneurs are more like “I can do it myself” and waste their hours trying to fix an algorithm or spending 6 hours to perfect that ad campaign.

80 percent problems – 20 percent causes

We may be forced to do things those $50 dollar things, but entrepreneurs need to understand that spending 80 percent of your time to get that 20 percent will lead them nowhere.

80 percent of the smalls tasks – 20 percent of the total cost

Founders often make mistakes in hiring. They believe that hiring more people will give them better results, so they spend recklessly on hiring. Entrepreneurs need to understand that scaling up before time is a trap and it might kill your company. Define your priorities, and only hire people that have direct impact on the company’s revenue and things that you don’t excel in.

80 percent of time working – 20 percent of relaxation

Automate everything that is not so critical, use tools to do that. You can start with automating your social media posts by a combining different tools. Many entrepreneurs use a combination of softwares and don’t even check their social media channels.

Don’t feel bad about spending your time resting. According to several researches, the most productive people are lazy. If you can do the $500 an hour work for a few hours, does it really matter what you do the rest of the day?

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