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How To Create Powerful Goals and Growth This Year With Pareto Principle
Happy New Year! It is time to consider what we want for this coming year! Every business owner wants to grow or resolve pain points, but what actions can you take that will actually create those results?
WHEN I COULDN’T FIGURE OUT WHAT WAS WRONG
In the past when I have been stressed out, overworked and underpaid in running MY OWN business, I was confused about why I could not seem to get ahead of my work. Plus inspite of all of this work I did not find MARGIN(the stuff that is left over in the form of money, time or energy) to actually enjoy my life and I didn’t know what was the first place to look to fix it since working more didn’t seem to be enough.
MARGIN – the stuff that is left over in your business in the form of money, time or energy that makes running a business worth while.
WHAT TOOL CAN I USE TO DISCOVER A SOLUTION? PARETO GOALS
When I have felt TRAPPED in the rat race for MARGIN… the primary problem I had… was the lack of FAITH in and UTILIZATION of Pareto’s Principle. Please read this next boring paragraph and then I promise it will get more interesting when we apply it to your business…!
Pareto’s Principle (otherwise known as the 80/20 rule) states that 80% of consequences come from 20% of the causes, meaning an unequal relationship between inputs and outputs. The ratio doesn’t have to be exactly 80/20 OR even add up to 100 because the point is the concept that a seemingly little portion has a REALLY big impact. This came about because economist and mathematician Vilfredo Pareto discovered this phenomenon occurring in nature. Again this means the BIGGEST marginal change you can have on a problem or goal will only require focusing on leveraging the most impactful inputs.
Pareto’s Principle states that 80% of consequences come from 20% of the causes, meaning there is an unequal relationship between inputs and outputs
WHAT DOES THIS MEAN FOR MY BUSINESS?
I have a simple way I apply this to people I consult with and this can help you to. Creating what I call PARETO GOALS for your business means is the method to get what you want out of your business this year. If you want to grow… if you want free time… if you want more profit simply eliminate the bottom 20% and focus on the top 20% of your most profitable products, customers, services employees, and processes. I promise you, this is both a CLEAR and EFFECTIVE path to massive improvement of the margin in your life. For example here is the princple applied to some common problems I hear about:
THINGS YOU WANT MORE OF
- 80% of your revenue will come from 20% of your customers
- 80% of your profit will come from 20% of your products sold
- 80% of your productivity will from 20% of your employees
THINGS YOU WANT LESS OF
- 80% of your thru-put problems will come from 20% of your manufacturing systems
- 80% of your losses will come from 20% of your products made
- 80% of your HR problems will come from 20% of your employees
- and so on...
Whatever outcome you want to understand the source of… so you can INCREASE or DECREASE it… you simply need to ask yourself what is the 20% that is causing this and PRIORITIZE resolving it this year. If you stay focused and define the 20% you have (right now while reading this blog) created a FOOL PROOF strategy for growth in your goal.
PARETO GOALS – If you want to grow… if you want free time… if you want more profit simply eliminate the bottom 20% and focus on the top 20% of your most profitable products, customers, services employees and processes.
HEY?! IF IT IS THIS SIMPLE WHY DOESN’T EVERYONE DO IT?
REASON 1: The main reason I have seen for why people do not create the solutions to their goals is that they BELIEVE the principle but they FORGOT. They got busy (we all do) and distracted with putting out fires and forgot what they know for a moment.
It is not uncommon for me to bring up Pareto’s Principle when helping a client uncover their solution and find they say “ahhhh I forgot about that!” It’s so powerful that when they remember this principle exists and then apply it to their problem they are suddenly awakened with inspiration, energy, and clarity to tackle their goal. The principle is so simple and powerful – I often do not need to say more because the solution is clear. They see it clearly like a road before them because THEY are the master of their business.
REASON 2: The second reason why business owners don’t apply this is that they DON’T BELIEVE it will work for them and they are too afraid. I admit I also find it is very scary idea to stop selling to customers willing to pay you money (even if they are a pain to work with) OR to stop selling products even if they aren’t profitable. It took so much effort in the past to get that customer or product going that it feels like a failure to let it go.
The problem for these folks (myself included) is that the longer they don’t take action to ruthlessly prioritize so they can solve their problem… the longer they will stay stuck and exhausted.
I have seen it many times over when I try to help tired business owners identify their top 20% of products and bottom 20% and they dance around committing to focusing promotions and cutting off others completely. I feel so sorry to say but these entrepreneurs seem forever “confused” and tired. They have a very hard time finding their way out the mire of NO MARGIN because they don’t want to prioritize the top 20%. I am not saying it is impossible to find margin, but I personally have never seen it happen that they suddenly make margin (rolling in cash, free time and energy) if they are unwilling to recognize this principle on some fundamental levels.
YOUR NEXT STEPS:
Practically here is how you use this information NOW to move your business strategy for this year forward:
- RESOLVING PARETO PROBLEMS:
What is the BIGGEST pain point currently facing your business? Ask yourself “How could you apply PARETO’S PRINCIPLE to narrow in on the solution?” You can then write on a piece of paper this sentence and begin to brainstorm what answers should go here:
80% of______( result you see and don’t like)____ … is coming from 20% of ______(inputs related to the result)____________.
Once you identify it – now it’s time to eliminate or focus on fixing that 20%. If you can resolve that issue, it will elevate 80% of the pain in that area
of your business and create refreshment usually in the form of MARGIN (time, energy, cash).
- CREATING PARETO GOALS:
What is your BIGGEST growth goal this year? Ask yourself “How could you apply PARETO’s PRINCIPLE to narrow in on my solution?” You can then write out a sentence like this to help you brainstorm and figure it out:
80% of______( good result you want to see )____ … will from 20% of ______(inputs related to the result)____________.
THERE ARE TIMES FOR HUSTLE
There are certainly unavoidable times in business that we will work long, hard hours. I do not want to pretend (like some false gurus) that making money or creating something meaningful can be done in your PJs in 4 hours of work a week… if only you just believe and do this principle. That is not true. When you are just starting out your business… when you have newborn and young children… during peak seasons… these are all times that will forever be challenging no matter how much planning you do. But the key here is they must be SEASONS when you are growing and changing, which by definition implies there is a beginning and end to that season. You can’t let yourself burn out or you will not be able to keep going forever. You must make time this month to create a strategy for the part of your business that will give you joy and make you feel your success.
CONCLUSION:
If you are seeking a FRESH season for this coming year… please let this article meet you and encourage you with real solutions. And don’t hesitate to email and share with me or comment in a post what your PARETO GOALS for your business will be this year!
*Click to join LIVE webinar on this topic Tuesday Feb 9, 2021 at 12 pm CST. “Get 80% More Results With 20% Effort In Your Business This Year” –> Sign up: https://bit.ly/2MLLYUC. *
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Hey – I want you to grow this year and I’m here to help! If you haven’t made solid plans yet, maybe it’s time to HIRE SOMEONE who can provide support and strategy so you do. Learn more OR hire me as your business growth consultant for 3, 6 and 12 months by clicking this link.
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