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What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed

What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed
What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed

Entrepreneurs are constantly bombarded with ideas and beliefs surrounding business and so any small business failure is immediately blamed on the lack of knowledge.

Although knowledge plays a big key in one's success, there is no secret, no formula that millionaires and billionaires around the world adopt to see results wildly beyond the norm.

I used to believe that as soon as I buy a course, as soon as I attend a webinar, as soon as I start networking with successful people, I'll be able to learn the secret that has propelled them in their careers.

Working on my most recent SaaS business, Hawk Prospecting, I believe now that there is no secret.

There is no formula or singular mystery that we don't have already.

Success only demands a few things from the entrepreneur, and today we're going to be talking all about one of those things.

That thing is simply the 80/20 rule.

What is the 80/20 rule?

The 80/20 rule, also known as Pareto's Principle, is a simple principle that was bought to light by Vilfredo Pareto in 1906 when he discovered that 20% of Italy's population owned 80% of the wealth and land in Italy.

He followed up his findings by looking in his garden, of all places, and saw that the principle also applied to his peapods.

20% of his peapods were producing 80% of the peas.

Since then, there has been little scientific analysis that proves or disproves this principle, however, there have been many instances that deem this principle both valid and accurate.

A few examples in our realm of business would be that:

20% of salespeople make 80% of the money

20% of clients make up 80% of our agency's revenue

20% of companies own 80% of the market share

As you can see, there are many instances where Pareto's Principle can be applied.

How does the 80/20 rule apply to business & entrepreneurship?

What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed

When we look at the greatest businesses that exist, we immediately think of companies like Apple, Amazon, Tesla, Google, Microsoft, Facebook, and much more.

All of the people behind these companies have one main thing in common (along with a few other things too).

They have a Pareto brain, meaning they're naturally good at prioritizing the most important part of their lives and businesses - the parts that produce 80% of their results.

They understand that spending their time on the important 20% is what will drive the greatest results.

Starting Hawk Prospecting, I'm the one who has to do everything, all the day-to-day activities of the business.

I'm the one who does product building, product iterating, customer support, marketing, sales, outreach, and whatever else you can think of.

See, the problem with this is that I'm balancing my 24 hours doing things that move the ball forward at Hawk Prospecting.

However, the things that move the ball forward are all a result of me working in my business.

I'm spending 80% (if not more) of my time working in my business and so I can't prioritize the 20% that drives the most results.

That means that as soon as I stop working, the cogs will stop turning, and Hawk Prospecting will meet stagnation.

When you're working in your business, it's like a hamster running on its hamster wheel.

Working in your business is a trap lots of small business owners get into, they start a business to escape their job, to have more freedom, to make more money.

However, you quickly start to realise that business isn't all sunshine and rainbows.

You quickly realise that what you tried to escape came back to haunt you - you've got a full-time job that needs you to work 24/7, and all of a sudden, you've got less time and less money than ever before.

The 80% of work you do as new entrepreneurs is the work that produces only 20% of your results.

This is because most people who go into entrepreneurship go in without a plan or process in place.

You work hard on building the product, "and what's next?" you ask.

Eventually, you realise that you need clients or customers and sales for your business, so you start doing the marketing, the sales, the outreach, and everything possible to drive some sales.

It might even work - but once it starts working, you can't stop, or else the money stops too.

Going back to the examples of successful companies, we see that their CEOs are not working in the business, they work on the business itself.

Elon Musk, Jeff Bezos, Mark Zuckerberg, Bill Gates, and all the other successful CEOs understand that in order to see remarkable results, they need remarkable systems to run the business.

Their Natural Pareto Brains enable them to prioritize the 20% of important work that drives 80% of the business' results

With that said, the other 80% is still important for a business to succeed, so who takes care of that?

In the early days, these entrepreneurs are the ones building their businesses, however, they understand that in order to make this business successful, they will need to quickly step into the CEO position and hire people to take care of the 80% of work that still needs to get done.

They build business plans and strategies that stretch out 5, 10, 15, 50 years into the future.

They hire the right talent for the right job, give them a process to follow, and the freedom to act on their own initiative.

Bringing on the right people to operate their businesses, they can now focus on the important 20% of work that drives the greatest results.

That's the secret we're all missing.

We lack the systems and processes that businesses need to be successful.

We just work, day after day, without any real indication of what we're doing, where we're going, and if we're making progress or not.

Not much of a secret, right? We all know it, we just don't know how to apply it.

How to apply the 80/20 rule in our business

What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed

It all simply comes down to time management. How we manage our time and what we choose to focus on is what will drive results.

I've spoken about effective time management before, I've even touched on the 80/20 principle within that article.

We need to spend our time working on the 20% of things that will drive the greatest results - to do this, we need to automate, outsource, or delegate the other 80% of the work to free ourselves from that burden.

The book I'm currently reading, 'The E-Myth Revisited,' talks about how your systems and processes need to be simple and repeatable.

Imagine you're going to franchise your business - what needs to be done for all the franchises of your business to run exactly the same?

When you think like this, you'll be able to build your system with a plug-n-play mentality in mind, a turnkey solution that just requires people to power it up.

However, I can see the first objection from a mile away.

"So how do we hire people to run the cogs of the business if we're just starting out?"

That is the question that we all must figure out.

How do we build up the business to a point where we can finally bring in people to run it without our interference?

How do we go from side hustle to a business?

How do we enable ourselves to bring in people that free us from the burden of the 80%?

No matter what point in your business you're in, you need systems.

You need to wake up every day and know what's going to happen in your business.

Are you going to spend the first 30 minutes checking customer support?

Are you going to spend the next 2 hours on outreach?

Are you going to spend the hour after that on following up?

Maybe another 30 minutes setting up some automation?

You need a process to follow every day in your business, a process that works and drives results.

Once that process is in place, find a way to automate as much of it as possible, only then will you be able to open up the doors for creativity.

Going back to the example with Hawk Prospecting, I quickly ensured that every day, I had a set of systems and processes I can follow to guide me.

I built a go-to-market strategy that looked something like this.

Every day, I will:

  • Reach out to 30 new people on Facebook
  • Reach out to 20 new people on LinkedIn
  • Reach out to 20 new people through email
  • Answer 10-20 Quora questions
  • Share Hawk Prospecting on startup sites
  • Follow up with messages from the previous day
  • Find 1 way to improve Hawk Prospecting

These are all things that can be replicated systematically every day to drive results for the business.

I've already started to automate some of it, like the emails, however, once we're able to delegate the rest, that's when I'm fully able to focus on what drives results - the 20%.

If that is the system, then the goal is to validate the business and ensure that people are willing to buy my solution.

There is no point in dumping money at something that doesn't work - the best way to build a business and delegate is to first know the business works.

When I know that, I can then start worrying about hiring the right people to keep the system turning.

How do you develop the right systems?

What Is The 80/20 Rule & How Can Entrepreneurs Use It To Succeed

Developing the right systems is going to simply fall under the 20% of tasks which produce 80% of the results.

Therefore, it's important you really sit down and start putting together a system along with a roadmap for where you want to go, your goals.

With Hawk Prospecting, I'm looking to build a suite of SaaS software that simplifies the lives of agencies and salespeople, reaching a valuation of £1 billion or more.

That is the vision and goal that I'm reaching for.

You may want to look into this article on goal setting to learn more about setting smarter goals.

Think about what you want to see happen in your business, maybe it's to build a $1 million/year business, maybe it's $10 million/year.

Without this goal, you won't know what you're ultimately looking to achieve and so you won't be able to build the right systems.

Once your vision is set, and you have goals that align with that vision, you can now think of the system that will take you there.

Mcdonalds wanted to serve a lot of customers and so the way to do that was to build systems that helped them create food that was produced identically every time.

No matter how many times you go to Mcdonalds, be it the same one or a different branch, your food will most likely be the exact same - good quality, cheap, fast, that's what they've built their systems around.

So ask yourself what your business aims to do and think about the things that your systems must do to fulfill the purpose of the business.

Outline all the things possible and then narrow down on the most important things necessary, the top 20% of actions, that drive 80% of your results.

You have your goals, you have your systems, now just execute on them.

That's the 80/20 rule and how you as an entrepreneur can use it to succeed.

However, the systems you outline will not be a 'make it and forget it' type of thing.

The systems will have to constantly be improved, constantly be refined, and constantly become more and more effective.

The goal is to build systems that run without your interference - again, the only way to do so is by building systems that work, then slowly putting people in place of you to take care of those systems.

That's it, from here you're able to free yourself to take up the role of a CEO and work on your business, rather than in your business.

Have you found this article helpful?

If so, please comment below on what you think about the 80/20 rule and share this around with your network.

Till next time,

Mohamad

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