Thursday, February 21, 2008

Pareto's Law

I've been reading a business book called The 4-hour Work Week, which has really opened my eyes on a couple of things. The book is about improving effectivity and efficiency to the point where you only need 4 hours a week to perform all your work tasks, allowing you to free your life to live it up and do whatever you want.

The first point I'd like to discuss regarding this is Pareto's Law or the 80/20 rule. You may have heard of this, but essentially much of business falls into this 80/20 rule. 80% of your revenues comes from 20% of your customers. Or 80% of your revenues comes from 20% of your products. And 80% of your headaches comes from 20% of your customers, etc. etc.

So, one way to start improving effectiveness is to focus on the pieces that matter, and discarding the rest. If 80% of your problems come from 20% of your customers - then shed those customers. Just drop them. You've just improved your life and your business. With all that time freed up, you can now focus on more important matters - like looking at the 20% of your products that produce 80% of your revenues and further promoting those. Or supporting the 20% of customers that produce 80% of your sales.

The point is not to just make a lot of money - the point is to free up your time so you can spend your money. Your job is not your life. Your career is lame no matter what it is. Life offers so much more than work - get smarter, streamline your business and your time, and then you can see what life has to offer. To have complete freedom is hard to imagine, but it is attainable.