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Using The Pareto Principle To Make More Money, Time and ROI

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The Pareto Principle – also known as the 80/20 rule – states that in any given situation 80% of the outcome is produced by 20% of the input.

I'm going to tell you how to apply this principle to your freelance business to increase profitability, productivity and marketing ROI.

I can't remember where I first came across the Pareto Principle of 80/20, but I now see it everywhere.

It started in the 60s, when the Italian economist Vilfredo Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. The management consultant Joseph M. Juran developed the concept into the context of quality control and improvement, and then another management consultant, Richard Koch, wrote his landmark book The 80/20 Principle in 1997, which continues to get updated and expanded upon today.

How does this apply to you?

  • 80% of my profit comes from 20% of my client
  • 80% of my problems come from 20% of my clients
  • 80% of my sales are in 20% of my services
  • 80% of my sales come through 20% of my website pages

You get the idea.

80/20 can be too simplified, but the idea remains that often, most of an outcome is produced by a small percentage of the input.

For so many years I ran my business just on putting out fires. I worked on what was urgent without ever getting analytical and working out where I should really be applying my efforts.

When I realised, for example, that 20% of my clients were producing 80% of my profits, I realised that if I could double down on that and invest in growing that client base, my time would be spent so much better than putting out dramas for the other 80% of my clients. I could deepen my relationships with just a couple of great clients who were low-drama and also valued my time.

Or when I realised that 20% of my clients were consuming 80% of my time, I realised that I had allowed some clients to become far too high-maintenance. I ended up finishing a couple of those contracts up, as they wouldn't allow themselves to be scaled back. You win some, you lose some. I learned a lot about setting expectations and boundaries with those clients!

So I wanted to share three ways you can apply the Pareto Principle to your business and analyse what's really working.

How to use the 80/20 Rule to increase Profitability

Every quarter or so, I worked out how many hours I've been working with each client divided by what they paid me. This gives me an hourly rate, and when I'm not managing things well, I can absolutely see in play the principle that 20% of my clients take up 80% of my time.

By checking on on this, I can see a few things: where I am routinely doing too much time for certain clients, working beyond scope or just not keeping a tight reign on things. So I know I need to address that. I can also see where I have potential to do more for a client – a client who is paying good money and has become quite low maintenance – I can propose a new project to them or do something to re-energise things there because I have the scope to do it.

How to use the 80/20 Rule to increase productivity

On any given day, we have, on average, about 15 tasks on our to-do list. I know this is true for me.

Using the 80/20 Rule, identify your top three tasks. Which 20% of your to-do list will result in 80% of the impact you can create for that day?

Most of us look at our to-do lists and choose tasks that are either urgent or easy. We often toggle back and forth between those urgent and easy tasks as we get tired, and suddenly that's it for the day and we didn't get to anything with real impact. Nothing that will move the needle forward for our business.

I apply the 80/20 Rule by also keeping one of my workdays totally devoted to working on my business, not on my client work. So 20% of my week at least will be working on highly impactful work.

How to use the 80/20 Rule to increase the return on investment in your marketing

Using this rule, think about your marketing efforts. 20% of your posts are likely driving sales or email sign-ups or engagement. Which 20%? What do those posts have in common? How can you double down on that sort of content? That sort of strategy?

Take a look at your website. Which portfolio items or pages or blog posts are getting 80% of the traffic? What do they have in common?

Look at your emails and do the same. Look at all your marketing activity and notice what is really getting people to engage or convert.

Get things off your to-do list

The whole point of all of these exercises is to analyse for trends so that you can put more effort into those activities and let the other things fall off your list.

Just let them go! If you spend time nurturing the 20% of your most profitable clients or replicating the most effective 20% of your TikTok videos – your business will grow. You don't need to do the full 100% anymore.

You will actually end up with fewer things you need to do!

Sold? I thought so.

 


 

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I work with freelancers, consultants and coaches (basically: one-person service-based businesses) to move away from the hustle and create a business that gives them freedom.

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