Perry Marshall, the author of 80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More, is one of the world’s best-known and most successful business consultants. However, it wasn’t always that way. Originally an engineer, he was unsuccessful in his first sales job and was laid off. But then he picked up Richard Koch’s book The 80/20 Principle: The Secret to Achieving More with Less, and a light bulb went off. Marshall went on to develop an exponentially more powerful version of the principle, a dynamic law of cause and effect that can be used in business and in life to augment your strengths, cut your losses, and find success.

What is the 80/20 Principle?  

Also called the Pareto Principle, the 80/20 Principle is a phenomenon discovered more than one hundred years ago by Italian economist Vilfredo Pareto, who noticed that 80 percent of the wealth in Italy was owned by 20 percent of the population, just as the world’s wealth today is concentrated among a small number of high-worth individuals—Elon Musk, Jeff Bezos, Bill Gates, and so on. The principle also shows that 80 percent of your results will come from 20 percent of your efforts. So, if you have an email list of 10,000 people, only about 2,000 of those emails may be opened. It can also mean that 80 percent of your profits may come from just 20 percent of your products. In your business, if you focus your efforts on the top 20 percent—whether it’s your best customers or products—you can significantly amplify your success.

In the real world, the 80/20 Principle doesn’t always break out as rigidly—it might work out to be 60/40 percent, 70/30, and so on. It simply dictates that a minority of factors or individuals will bring about the biggest results.

Perry expanded the understanding of the 80/20 Principle by realizing that it’s a never-ending pattern. Within every 20 percent, there is another 20 percent. So if 20 percent of your company’s customers are responsible for 80 percent of your profits, 20 percent of those clients, or 4 percent, account for 64 percent of your profits. You can use the principle to determine what’s causing the losses and problems in your business too. “There are tiny levers that swing huge outcomes; tiny hinges that swing big doors, and the job of any business manager, any business strategist, any salesperson, is to find where they are,” Marshall says.

Here’s how you can apply the 80/20 Principle to drive results for your business.

Find the biggest levers
The first step is to identify the top 20 percent, or the things in your company that make the biggest impacts. For instance, pinpoint which pages of your website draw the most traffic, or rank your company’s expenses to determine the few items that eat up most of your budget. After you get started, you can use the principle to delve deeper to find the 20 percent within the 20 percent and find the moving parts that have the largest influence on your business. For example, work to improve the design and SEO of your most-visited web pages, or find ways to reduce some of your company’s biggest expenditures.

Eliminate waste
Applying the 80/20 Principle can also help you identify drains on your company. In fact, Marshall says, this can be the hardest part. You might discover, for instance, that eight of your ten salespeople combine to bring in only 20 percent of your sales or that the majority of a day’s tasks produce the least results. Your job is to right these disparities and make improvements. “80/20 is about what you ignore and what you eliminate, who you fire, what customer you no longer want, and what product you cancel,” he says. “It’s about saying no first, and most of us have a very hard time saying no.” The goal is to have less of what’s not working and more of what is, he explains. You’ll need to bring those salespeople up to speed or let them go and perhaps delegate your less important tasks to others so you can tackle the more important ones.

Grow your business

The 80/20 Principle can not only help you uncover not only your company’s top weaknesses but also its strengths, such as your most devoted customers. These customers can be your best “new” customers, Marshall says. He uses what he calls the Espresso Machine Principle to explain why. “If I have 1,000 people a week buying $5 lattes at Starbucks, or $5,000, 20 percent of those people want to spend four times the money,” he states. “And 20 percent of those people want to spend four times the money. And 20 percent of those people want to spend four times the money. If you do the math, that means one person will spend $2,700 on a gleaming stainless-steel espresso machine.” Plus, that individual will come back the next day and buy another latte, he adds.

You need to identify which clients would be willing to purchase that high-end, most expensive product, or your company’s version of an espresso machine, and develop that espresso machine, he says. Think of a high-quality product you can offer that would be your version of a first-class seat on an international flight or a luxury suite at a big game. Every business, including yours, has a small number of customers who will buy everything it has to sell, Marshall says. “Think espresso machines,” he says. “Think about what could be super deluxe, served on a silver platter.”

For more information, visit perrymarshall.com